United States
Answer ... A company’s board of directors, elected by the shareholders and subject to fiduciary duties, manages the company’s business affairs. However, shareholders have decision-making rights on key matters including:
- director elections and removals;
- amendments to the articles of incorporation or bylaws;
- merger;
- sale of all or substantially all of the company’s assets;
- dissolution;
- advisory votes on executive compensation; and
- advisory or binding votes on shareholder proposals.
Under New York Stock Exchange (NYSE) and Nasdaq rules, shareholder approval may be required for issuances involving:
- parties related to the company;
- a change in control of the company; or
- 20% or more of the common stock or voting power of the company.
In addition, NYSE and Nasdaq listing rules require companies to obtain shareholder approval of equity plans applicable to directors.
Shareholders, especially institutional investors, will engage with company directors to provide input on company matters.
Most state corporate statutes require companies to hold an annual shareholders’ meeting to be held at a date, time and place determined in accordance with the company’s articles of incorporation or bylaws. NYSE listing rules require companies to hold an annual shareholders’ meeting during each fiscal year; Nasdaq rules requires each company to hold an annual shareholders’ meeting no later than one year after the end of the company’s prior fiscal year. Under Delaware law, director elections and ‘any other proper business’ may be transacted at such annual shareholders’ meeting.
Companies must submit a resolution for stockholders to approve the compensation of executives as disclosed in the proxy statement under Item 402 of Regulation S-K at least once every three years. However, the say on pay vote is not binding on a company.
United States
Answer ... Shareholders typically exercise their rights through voting, either in person or by proxy, at the company’s annual general meeting. Under Delaware law, shareholders can call special meetings if authorised by, and subject to, its articles of incorporation or bylaws.
Shareholder vote requirements for the approval of corporate actions are usually provided in the company’s articles of incorporation or bylaws. Under Delaware law, a majority shareholder vote is required to:
- amend the articles of incorporation;
- approve a merger or sale of assets; and
- effect a dissolution of the company.
Companies, in their formation documents, may set a higher approval percentage requirement than the default statutory standards.
Shareholders can also act by written consent in lieu of a meeting at some companies, if allowed by the company’s articles of incorporation or bylaws. In addition, shareholders may:
- inspect the books and records of the company;
- wage a proxy contest to change board composition;
- engage directly with the board and company management;
- file a derivative action;
- file a direct action; and
- apply public or private pressure on the board.
Under Rule 14a-8 of the Securities Exchange Act, public companies must include proposals submitted by qualified shareholders in their proxy materials. ‘Qualified shareholders’ are those that have continuously held at least $2,000 in market value or 1% of the company’s securities that are entitled to vote for at least one year by the date they submit the proposal, and that hold those securities until the meeting date. In practice, this means that institutional investors are almost always qualified to make proposals in company proxy materials.
Shareholders may also ask the Securities and Exchange Commission or other regulatory bodies to initiate an investigation of the company and/or its personnel for violations of relevant law or regulation.
United States
Answer ... Under Delaware corporate law, shareholders generally have the right to elect directors at the annual shareholders’ meeting. Only the NYSE requires listed companies to have a nominating committee comprised entirely of independent directors, subject to certain exemptions.
Shareholders can also nominate director candidates either before or at a shareholders’ meeting if certain conditions are met – including, without limitation, compliance with company bylaws and proxy rules.
In addition, shareholders (especially institutional investors) may exert public or private pressure on a company as to board appointments and operations.
United States
Answer ... Shareholders are not liable for the acts or omissions of the company and owe no fiduciary duties to the company or to other shareholders.
United States
Answer ... Shareholders are not liable for the acts or omissions of the company and owe no fiduciary duties to the company or to other shareholders. However, courts can ‘pierce the corporate veil’ to impose personal liability on the shareholders in exceptional circumstances, such as where the corporate form is being used as a sham to perpetrate a fraud or to avoid liability.
Shareholders, as individuals, can be liable under state and federal laws for:
- actions that constitute theft, fraud or bribery, such as violations of the Foreign Corrupt Practices Act; and
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violations of state and federal securities laws, such as:
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- material misrepresentations and material omissions in relevant documents;
- insider trading; and
- market manipulation.
United States
Answer ... Shareholders generally do not have a pre-emptive right in case of issuance of new shares, unless expressly provided in the company’s articles of incorporation or bylaws. Contractual pre-emptive rights can be awarded during venture capital financing transactions. In both cases, those pre-emptive rights terminate as of the completion of the company’s initial public offering.
Under NYSE and Nasdaq rules, shareholder approval may be required for issuances involving:
- parties related to the company;
- a change in control of the company; or
- 20% or more of the common stock or voting power of the company.
United States
Answer ... Shareholders or groups of shareholders that are not ‘passive’ and own or acquire beneficial ownership of more than 5% of a company’s registered securities must make a Schedule 13D filing with the SEC. Shareholders that are interested in influencing the company or are officers and directors must file the Schedule 13D within 10 days of crossing the 5% threshold, as well as within 10 days of subsequent changes in ownership of more than 1%. Schedule 13D discloses a shareholder’s ownership and investment purpose/control intent. Shareholders can increase their ownership beyond 5% in the 10 days between crossing the 5% threshold and the date on which the Schedule 13D is filed with the SEC.
‘Passive’ investors that own between 5% and 20% of a company’s stock may file, along with other exempt investors, a Schedule 13G after year end. The Schedule 13G is shorter and less burdensome than the Schedule 13D.
Section 13F of the Securities Exchange Act requires institutional investment managers with more than $100 million in assets under management to disclose their ownership exchange-traded stock and other instruments as of the end of each quarter within 45 days after the end of the relevant quarter.
Directors, officers and 10% shareholders must file a Securities Exchange Act Section 16 form reporting their beneficial ownership of company registered securities. Covered persons must file:
- a Form 3 at the time the company registers the securities or within 10 days of such person becoming subject to Section 16 rules;
- a Form 4 within two days of any change in beneficial ownership; and
- a Form 5 within 45 days of the end of the company’s fiscal year.