#11696 - Internal Governance Procedures - Business Association (Duke Cox)

Means

1. § 8.20 (a) board may hold regular or special meanings (b) by any means wherein all members can HEAR each other. (TELEPHONIC ATTENDANCE PERMISSIBLE).

2. § 8.21 (a) except to the extent that the articles or bylaws require action at a meeting, action required by this act to be taken by board may be taken without a meeting if the board UNANIMOUSLY consents.

Notice

1. § 8.22 (a) unless the articles or bylaws provide otherwise, regular meetings do not require notice of DATE, TIME, PLACE or PURPOSE (b) special meetings require notice of DATE, TIME, and PLACE, but not purpose unless otherwise provided.

2. § 8.23

   1. (a) director can waive notice requirement via writing.

   2. (b) in addition, attendance of a meeting constitutes waiver of the notice requirement, unless you make an appearance and (i) object to the meeting AND (ii) do not participate on matters of substance.

Quorum and voting

1. § 8.24

2. (a) Unless the articles of incorporation or bylaws or this act require a greater number, QUORUM = (1) in a corporation with a FIXED BOARD, a MAJORITY of that FIXED BOARD, (2) in a corporation with a VARIABLE BOARD, a MAJORITY of those PRESCRIBED, or, if no number PRESCRIBED, a majority of those in OFFICE.

3. (b) QUORUM may NOT = <1/3

4. (c) where QUORUM is PRESENT, AFFIRMATIVE VOTE OF MAJORITY of those PRESENT constitutes act of the board. (>1/2 of all directors present vote yes)

   1. For SH action, majority of those voting is enough (yes>no).

§ 8.25 (a) board may appoint committees, (d) to the extent specified by the board of directors or in the articles, committees may exercise the powers of the board (e) lists exceptions.

There must be deliberation (Fogel)

Notice

1. Notice of place, time, and date required for annual shareholder meeting and for any special meetings

2. Notice of special meeting must describe purpose

3. Notice is given to those who are shareholders as of a designated “record date” prior to meeting

Quorum and voting

1. § 7.25

2. (a) SHARES entitled to vote as a separate group on a matter may only take action if a QUORUM of those shares exists as to the matter; unless provided otherwise, MAJORITY = QUORUM

3. (c) If QUORUM of shareholders exists, yes>no (majority of quorum) = shareholder action.

Plurality Voting

1. MBCA § 7.28: directors are elected by a plurality of the votes cast by the shares entitled to vote

2. Example: 1000 shares outstanding, one vacancy (1 share = 1 vote). M gets 600 votes, N gets 650, O gets 600 N wins

3. This means that if the number of nominations is equal to x (the number of vacancies, then all nominees get elected.

4. This, in turn, means that the real power in corporate elections is over control of nomination (board has the power of nomination)

Straight voting

1. MBCA § 7.28: (b)-(c) Default rule for manner of voting is straight. unless articles provide for cumulative voting

2. Shareholder can cast, for each open directorship, a number of votes equal to number of shares

3. Example: S has 100 shares, T has 200 shares, and there are 7 spots for Director

   1. S can cast a total of 700 votes (shares x open spots), but cannot cast more than 100 votes for any nominee

   2. T can cast 200 votes for each of his 7 nominees, so he can elect all the directors

Cumulative voting

1. Total # votes = (# shares) x (# open positions)

   1. You can distribute your votes any way you want—the number of votes for each open position is not limited

2. Example: Sally has 700 shares, Bob has 300, 3 open positions

   1. Sally has 2100 votes, Bob has 900 votes

   2. Sally: 901 Sally, 901 N, 298 O

   3. Bob: 900 Bob

   4. Sally, N, and Bob win because they have a plurality

3. Determine minimum # of shares needed to elect a particular number of directors:

   1. X = (S x N)/(D + 1) + 1

   2. X = minimum number of shares needed, S = total number of shares that will be voted at meeting, N = total number of directors desired to elect, D = total number of directors to be elected

4. Determine how many directors can be elected by a group controlling a particular number of shares:

   1. N = [X*( D + 1)]/S

   2. N = number of directors that can be elected, X = number of shares controlled, D = total number of directors to be elected, S = total number of shares that will be voted at meeting

5. This way, minority shareholders will still have some power to elect directors

Cumulative Voting and Staggered Boards

1. As the number of directors to elect increases, the percentage of stock shareholders must hold to elect 1 director decreases

2. So a minority must hold more stock to elect a single director for a staggered/classified board than an unclassified board because the number of directors to be elected each year is only a fraction of the full board, and the fewer directors that are to be elected, the more votes the minority must have to elect them.

3. Cumulative voting is usually a way for minority shareholders to get someone on the board, but combining it with a staggered board weakens the effect of cumulative voting

Removal

1. Removal by the Shareholders

   1. MBCA § 8.08

      1. (a) may remove with or without cause unless articles provide directors can only be removed for cause

      2. (b) if director elected by voting group of holders, only...