Shareholders’ Powers

ü Shareholder powers include approving all fundamental changes to the corporation:

Amending articles of incorporation or bylaws.

Approval of mergers or acquisition.

Sale of all corporate assets or dissolution.

ü Shareholders also elect and remove the board of directors.

Shareholder Meetings

ü Shareholders’ meetings must occur at least annually. Voting requirements and procedures are:

Quorum of shareholders owning more than 50% of shares must be present to conduct business;

Shareholders may appoint a proxy or enter into a voting trust agreement.

ü For special shareholder meetings:

Notice and time of meetings must be sent in writing to each shareholder within a reasonable time ahead of the meeting.

Notice must state reason for meeting and only deal with this matter.

Shareholder Voting

ü Common shareholder entitled to one vote per share.

ü Articles and by-laws can exclude or limit voting rights of certain classes of stock.

ü Quorum must be present -- shareholders representing more than 50% of outstanding shares must be present.

ü Shareholders may vote on resolutions.

ü Need majority present for most resolutions.

ü Need a “super majority” (e.g., 67%) for important matters: sale of assets, etc..

ü Voting lists by corporate secretary contains record of stock ownership. [Cut off date 70 days ahead of action (notice, dividends, etc..)]

ü Methods of Increasing Minority Shareholder Power Within the Corporation:

ü Cumulative Voting allows minority shareholders to get a board member elected.

ü x # to be elected x shareholders # of shares = shareholder can cast them all for one board nominee.

ü Shareholder Voting Agreements.

ü Voting Trusts—Trustee votes the shares.

ü Proxies and Shareholder proposals under Securities and Exchange Commission Rule 14a-8:

ü Proxy solicitation must include proposals which will be discussed at the meeting.

ü Shareholders who own $1,000 worth of stock may submit their own proxy solicitations.

ü Company does not have to include shareholder proposals which relate to “ordinary business operations.”

Rights of Shareholders

ü Shareholders have the right:

To vote.

To have a stock certificate.

To purchase newly issued stock.

To dividends, when declared by board.

To inspect corporate records.

To transfer shares, with some exceptions.

To a proportionate share of corporate assets on dissolution.

To file suit on behalf of corporation.