Contact us with your California corporate & securities law questions (949) 353-6347 or Contact us here

State Law And Shareholder Representatives

As noted yesterday, the Securities and Exchange Commission has proposed to amend Rule 14a-8 to modernize "the process for shareholder proposals to be included in a company’s proxy statement".  Among other things, the SEC is proposing  to amend the eligibility
requirements of Rule 14a-8 to require shareholders that use a representative to submit a proposal for inclusion in a company’s proxy statement to provide documentation attesting that the shareholder supports the proposal and authorizes the representative to submit the proposal on the shareholder’s behalf.  The proposing release notes that Rule 14a-8 does not presently address a shareholder’s ability to submit a proposal through a representative and that "absent Commission regulation, this practice has been governed by state agency law."

As a matter of fact, the California General Corporation law is silent on who, other than the board of directors, may present proposals at shareholder meetings.  The GCL is also silent on how proposals are to be presented.  It does not, for example, require that proposals be moved and seconded.  Thus, it should be no surprise that the GCL does not expressly address whether someone may act as representative of a shareholder to present a proposal at a meeting.

The GCL does, of course, provide that every person entitled vote shares may authorize another person or persons to act by proxy with respect to those shares.  Cal. Corp. Code § 705(a).  The GCL defines "proxy", however, only in reference to the power to vote:  "'Proxy' means a written authorization signed or an electronic transmission authorized by a shareholder or the shareholder's attorney in fact giving another person or persons power to vote with respect to the shares of such shareholder".  Cal. Corp. Code § 178 (emphasis added).  Thus, merely authorizing another person to submit a proposal for inclusion in a proxy  would not be a "proxy" as defined by the GCL.  Such a relationship, however, does meet the Civil Code's definition of an agent: "one who represents another, called the principal, in dealings with third persons".  Cal. Civ. Code § 2295.  The proposing release's use of "representative" in lieu of "proxy" is consistent with these definitions.

The SEC's proposal does not address whether the use of representatives may be subject to limitations or conditions or even prohibited by state law or a company's articles or bylaws.  Many public companies already have provisions governing the process by which proposals may be brought before a meeting.  Typically, these take the form of advance notice requirements.  

 

Share on:

Corporate Governance, General Corporation Law

ANY QUESTIONS REGARDING CALIFORNIA CORPORATE AND SECURITIES LAW? CONTACT US DIRECTLY

We offer expert advice with the intricacies of California law.

Our years of experience and expertise allow us to help clients navigate the business laws in California.

CONTACT US

Get the latest news and analysis about California Corporate & Securities law. Subscribe to our newsletter today!

We respect your email privacy

ABOUT OUR AUTHOR

30172DBAB0084D3A8F39D7AF0A8E79BC.ashx Keith Paul Bishop
Partner at Allen Matkins
(949) 353-6328
 Contact me
Learn More About Keith

RECOGNITION

NationalLawReview

badge-author-large

nominee-badge

Get the latest news and analysis about California Corporate & Securities law. Subscribe to our newsletter today!

We respect your email privacy

CATEGORIES

see all

YOUTUBE

FACEBOOK