USA Law and Practice Contributed by: Kai Liekefett, Derek Zaba, Ram Sachs and Evan Grosch, Sidley Austin
2.9 Voting Requirements Shareholders are able to vote at the shareholder meet- ing or may vote via proxy. Shareholders commonly vote their shares electronically prior to the meeting through an electronic online platform, although paper and phone voting options are sometimes available. 2.10 Shareholders’ Rights Relating to the Business of a Meeting Under Rule 14a-8 of the Securities Exchange Act of 1934, as amended, shareholders may be entitled to submit a proposal to be considered at a share- holder meeting and to be included in the company’s proxy statement. A shareholder must meet owner- ship requirements by holding shares worth at least USD2,000 of the company’s market value for the prior three years, USD15,000 for two years or USD25,000 for one year. The shareholder must then provide a written statement that the shareholder intends to hold the requisite amount of securities and a written statement offering to meet with the company regard- ing the proposal. The proposal must be received by the company’s head office at least 120 days before the date the proxy statement was released for the prior year’s annual meeting, or in certain cases, for a reasonable period before proxy materials are sent for special meetings. The company may exclude a proposal made under Rule 14a-8 from its proxy statement on various bases, including a procedural defect, violation of state law, micromanagement (relating to a company’s ordinary business operations) and economic relevance (relat- ing to a company’s operations that account for less than 5% of its total assets, net earnings, gross sales and otherwise without a significant effect on the com- pany’s business). The US Securities and Exchange Commission Staff (the “Staff”) recently issued new guidance that the Staff will take a “company-specific approach” to determine whether a proposal relates to a significant policy issue, rather than focus on whether a proposal has a “broad societal impact” or universally significant issues. The Staff also reinstated prior guidance that propos- als seeking “intricate detail or specific timeframes or
methods for implementing complex policies” or that are “highly prescriptive” are excludable as microman- aging the company. Alternatively, a shareholder owning at least one share may submit a proposal via the process set forth in the company’s by-laws. However, companies are not typi- cally required to include a proposal submitted under the by-laws in their proxy statements and proxy cards disseminated to shareholders, and as a result, such proposals are significantly rarer than Rule 14a-8 pro- posals. 2.11 Challenging a Resolution Shareholders can make certain procedural challeng- es to resolutions passed at a shareholder meeting. Resolution of such challenges depends on the cir- cumstances at issue, as well as applicable Delaware law and the company’s certificate of incorporation and by-laws. Meetings must be called in compliance with Delaware law and the company’s certificate of incorporation and by-laws. Procedural defects related to a general meet- ing may include failure to meet the requirements for notice or quorum, a person without authority to do so having called the meeting, an improper person acting as chair of the meeting or an improper tally of votes, among other items. Notice See 2.1 Types of Meeting, Notice and Calling a Meet- ing and 2.2 Notice of Shareholders’ Meetings . Quorum See 2.6 Quorum, Voting Requirements and Proposal of Resolutions . Improper Authority to Call a Meeting/Improper Chair An annual meeting should be called in the manner provided in the by-laws (DGCL § 211 (b)). Typically, a company’s by-laws will stipulate that the board of directors is the proper party to call a general meet- ing. Additionally, corporate by-laws typically outline who may act as chairperson of the annual meeting. In many cases, this person is the president or chairper- son of the company or another member of the board.
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