As mentioned in yesterday's post, Nevada recently enacted a bill making several changes to its corporation and limited-liability company laws. One of these changes was to the quorum requirement for stockholder meetings in NRS 78.320(1)(a):
"Unless this chapter, the articles of incorporation or the bylaws provide for different proportions:
(a) A majority of the voting power, which includes the voting power that is present in person or by proxy, regardless of whether the proxy has authority to vote on all matters, any matter, constitutes a quorum for the transaction of business . . .".
A memorandum presented to the legislature provides the following explanation for the change:
"NRS 78.320 has created some confusion relating to stockholder meetings of large, public companies. This amendment will help clarify the treatment of 'broker non-votes' – where a stockholder does not instruct its broker on how to vote on matters where stock exchange rules prohibit the broker from voting. The bill seeks to clarify NRS 78.320 so that shares represented at a stockholder meeting by proxy will count toward a quorum as long as the shares are present in person or by proxy regardless of whether the proxy has the power to vote on any matter. The revisions result in a clearer standard as to when a quorum is present and brings the standard in line with that of the Model Business Corporation Act and Delaware law."
I disagree that this change is "in line" with Delaware. My understanding is that under Delaware law, "if no discretionary items are on the agenda, broker non-votes will generally not occur and uninstructed shares will not be deemed voting power present for any matter before the meeting, resulting in such shares being excluded from the calculation of a quorum." John Mark Zeberkiewicz and Robert B. Greco, "Determining and Disclosing the Effects of Broker Non-Votes, Rev. of Sec. & Comm. Reg. (April 18, 2018) (emphasis added). Therefore, AB 207 appears to go beyond Delaware by counting as present for quorum purposes broker non-votes regardless of whether there are any discretionary items on the agenda.
The amendment also strikes me as paradoxical. A proxy is a limited power of attorney granted by the stockholder authorizing another person to vote the stockholder's shares. If no authority to vote is granted as to any matter, is the proxy truly a proxy?