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Voting Rights Agreements


It turns out that this view is wrong. I show that about 15% of the companies that have gone public in the last six years have done so subject to a shareholders` agreement. Shareholders use these agreements to significantly change their rights. They are used ubiquitously to conclude contracts on the composition of the board of directors. The vast majority of agreements grant certain shareholders appointment rights to the board of directors, and more than half of them include a contract to consult in some way between some or all of the parties to an agreement. Agreements are also used to create contracts between shareholders and the company itself. In a substantial minority of agreements, the company grants certain shareholders veto rights over important company decisions, such as mergers, termination of the CEO or business change. Other agreements waive the corporate opportunity doctrine, limit the portability of actions in different ways, or use claims mediation. Most troubling is that, in a majority of agreements, the company commits to indefinitely supporting certain nominees on the shareholders` board of directors, putting the nominees on the company`s proxy list and doing its best to ensure the selection of nominees. The content of these agreements therefore differs in several respects from what we also know of social agreements concluded by private companies. The details of a voting agreement, including the timing in which it will continue and specific rights, are submitted to the SEC.

The company`s documents mention all outstanding shareholders and a deadline before the meeting. Shareholders who are not recorded in the minutes by the deadline cannot vote. Shareholder agreements may do so for reasons found in existing case law. The limits of the parties` freedom to organize the Charter and articles of the company are the spacious but ultimately limited legal system provided for by the Delaware General Corporation Law (DGCL). shareholder agreements should not be so limited; Instead, they sometimes set only the general limits of freedom of contract – the public order of the state, here Delaware. Why this unequal treatment? As contracts, shareholder agreements are a source of effective agreement between the parties and can only be amended with their agreement (as a standard). On the other hand, the articles of association and articles of association may be amended by collective decision-making which subordinates the rights of a given shareholder without agreement. Delaware courts take the difference seriously: there are rights that cannot be taken away from a shareholder, but that he or she can personally do without. A voting right is the right of a shareholder of a company to vote on matters relating to company policy, including decisions relating to the composition of the board of directors, the issuance of new securities, the initiation of capital measures such as mergers or acquisitions, the approval of dividends and significant changes in the company`s business. It is customary for shareholders to vote by an agent by sending their response by mail or by voting to a third proxy. . .


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