Shareholders Agreement 101: The procedures of holding shareholder meetings and voting on company matters(Part 7 of 10)
By Joanne Hue, published: 2023-02-20
Company bylaws or company regulations often require discussion on corporate matters before resolution. A shareholder meeting is a meeting of company shareholders where resolutions are placed for the discussion process. These discussions entail matters concerning the appointment of the board of directors, the company’s performance over a statutory period, and discussions regarding the increase in share capital, mergers or major acquisitions. Shareholder meetings may be conducted at frequent intervals. The meetings may be held annually, six-monthly, quarterly or during emergencies. While shareholders participate in meetings in person, they may have the option to cast their votes through other mediums or send a proxy voter. If the shareholder agreement does not outline the designated location
What Happens at a Shareholder Meeting?
Shareholder meetings are one of the few occasions in which shareholders and the company’s directors get to meet up and discuss the company’s trajectories.
Both public and private corporations hold annual meetings in certain jurisdictions. However, public companies tend to adhere to tougher regulations.
Equity shareholders hold the privilege to determine the issue to be discussed at the annual meeting. Even though the share of time that each firm reserves to provide a shareholders’ notice for the meeting varies, in most situations, the company mails the shareholders the details of the meeting.
The shareholders must receive a statement from the company that includes the next meeting’s date, time, and place. The statement also includes the agenda up for discussion and the issue to be voted on.
In the meeting, the minutes of the previous general meeting are presented and updated. Likewise, the presentations include the financial statement of the year. Additionally, the shareholders are presented with the board of directors’ decisions from the previous year and have the choice of approving or disapproving them. Some businesses will also outline their overarching objectives for the following year. The speeches also include other pertinent information for shareholders.
After the presentations and the speeches, companies reserve some time to entertain shareholders’ questions. There will usually be a period set up for shareholders to ask questions.
When the discussions are concluded, the candidates for the company’s board of directors for the forthcoming year are put to a vote by the shareholders. Aside from the board of directors, shareholders may also vote for other relevant matters.
Outside of the general meeting additional matters are debated and voted on when a special meeting is held. These might entail the removal of a senior executive, a pressing legal concern, or any other urgent issue.
What are shareholders’ voting rights?
The privileges given to shareholders of a company to vote on issues that impact the firm- such as the election of directors and the approval of important corporate acts- are known as stockholder voting rights.
Making the distinction between common and preferred shares is crucial as only the shareholders who possess common stock receive voting rights. This voting right is normally at a rate of one vote per share.
Investors holding preferred shares are treated preferentially in terms of dividend payments. This is often observed as compensation for the lack of voting rights on the company’s governance and policies. Preference shareholders also receive payment before common investors in cases of bankruptcy.
In a privately owned firm, shareholder voting rights are governed by the company itself. The state regulation governs the company’s regulation. Shareholder voting in a publicly listed firm must follow both corporate standards and Securities and Exchange Commission (SEC) regulations. Voting by shareholders takes place on issues including the choice of the board of directors, the endorsement of key corporate acts like mergers and acquisitions, and the adoption of bylaw amendments. The issues that shareholders vote on may have a massive influence on a company’s profitability, strategy, and bottom line.
Voting Procedures for Shareholders on company matters
You can utilize your shareholder voting rights in a few different ways. Depending on the business and the sort of owner you are, these vary. As previously indicated, some corporations may allow shareholders to cast one vote for each share of stock they possess, but others only allow one vote per shareholder.
If you have one vote per share, then the more invested you are in the corporation, the more influence you will have over corporate decisions.
However, a quorum is required for the meeting to start voting. For a shareholder meeting to be legal and for votes to be tallied, a quorum, or a sufficient number of shareholders, must be present or duly represented. Typically, a simple majority of share votes is required.
Beneficial owners own shares indirectly through a bank or broker, whereas registered owners hold shares directly with the corporation. Beneficial owners make up most American investors. You should receive instructions on how to vote in each of the following ways as either sort of owner.
A company may allow several means of voting for its shareholders. Generally, annual meetings of the company are open to shareholders in person. the company may also schedule ad hoc sessions at any time of the year. Information about forthcoming meetings is sent to shareholders through the mail or email.
A shareholder may also cast their vote by mail. If you are a registered owner, you may exercise your stock voting rights through the mail. To vote via mail, you will be given information on how to complete cast your vote through the mail. You may also have the option to vote by phone. A phone number and instructions for voting over the phone may be included in the mail-in materials you receive. Likewise, Some businesses now provide shareholders with online voting instructions. This could be a more practical method to finish the shareholder vote.
Proxy voting is also an option available for shareholders. Many shareholders can’t attend business meetings in person because they live too far away or are too busy to do so. Because of this, shareholders have the option to vote by proxy. This allows shareholders to designate a third party to act on their behalf.
Proxy voting requires a formal power of attorney or other authorization to permit the vote.
Shareholders’ Agreement and its influence on Shareholder meetings
Shareholders’ meetings and the voting process are integral to the company. Since shareholders represent the best interest of themselves and that of the company, a shareholders’ meeting is an opportune event for the discussion of vital matters. Likewise, the voting process allows for the election of an executive committee that will oversee the function of the company for the upcoming year. Due to its significance, shareholders’ details concerning voting rights are outlined in a shareholder’s agreement.
Conducting an annual general meeting is a productive yet resource-consuming process for a company. In periods where holding a shareholders meeting is not feasible, the shareholders’ agreement can help establish a policy-based governance system with directors by setting out the rights, duties, and responsibilities of the shareholders and directors of the company.
It is not pragmatic to vote on every matter. Therefore, a Shareholders’ Agreement can outline the procedures for making decisions. Furthermore, these agreements set the basic structure for decision-making within the company. These decisions may include how often meetings will be held and how decisions will be made. The agreement can also specify the roles and responsibilities of the directors, such as their duty to act in the best interests of the company and its shareholders.
You may also like:
- Shareholders Agreement 101: Rights and Responsibilities(Part 1 of 10)
- Shareholders Agreement 101: Terms and Conditions of Transferring Shares(Part 2 of 10)
- Shareholders Agreement 101: Resolving Disputes Among Shareholders (Part 3 of 10)
- Shareholders Agreement 101: Defining The Voting Rights of Shareholders (Part 4 of 10)
- Shareholders Agreement 101: The Roles and Responsibilities of the Board of Directors (Part 5 of 10)
- Shareholders Agreement 101: The terms and conditions of issuing new shares in a company(Part 6 of 10)
- How to Set up a shareholders’ agreement