Business Associations Slides

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Business Associations Slides

• 10-12-09

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Election of Directors

• One vote per share (MBCA 7.21(a))

Section 7.21 (a) Except as provided in
subsections (b) and (c) or unless the articles of
incorporation provide otherwise, each outstanding
share, regardless of class, is entitled to one
vote on each matter voted on at a shareholders
meeting. Only shareholders are entitled to vote.
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Election of Directors

• One vote per share (MBCA 7.21(a))
• All shareholders vote for every director (But see
  MBCA 8.04)

Section 8.04 If the articles of incorporation
authorize dividing the shares into classes, the
articles may also authorize the election of all
or a specified number of directors by the holders
or one or more authorized classes of shares. A
class (or classes) of shares entitled to elect
one or more directors is a separate voting group
for purposes of the election of directors.
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Election of Directors

• One vote per share (MBCA 7.21(a))
• All shareholders vote for every director (But see
  MBCA 8.04)
• Elected by a plurality (MBCA 7.28(a))

Section 7.28 (a) Unless otherwise provided in the
articles of incorporation, directors are elected
by a plurality of the votes cast by the shares
entitled to vote in the election at a meeting at
which a quorum is present.
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Election of Directors
Section 8.05 (b) The terms of all other directors
expire at the next, or if their terms are
staggered in accordance with section 8.06, at the
applicable second or third, annual shareholders
meeting following their election . . .

• One vote per share (MBCA 7.21(a))
• All shareholders vote for every director (But see
  MBCA 8.04)
• Elected by a plurality (MBCA 7.28(a))
• Elected annually to one-year terms (MBCA
  8.05(b). But see 8.06)

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Straight v. Cumulative Voting

• Straight voting
• Like political elections
• One vote per share for each opening
• Person with most votes wins
• Example Alpha-51 shares Beta-49 shares
• Board seat 1 Anne 51, Bob 49
• Board seat 2 Arnold 51, Betty 49
• And so on . . .

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Straight v. Cumulative Voting

• Cumulative Voting
• Proportional representation

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Straight v. Cumulative Voting

• Cumulative Voting
• Proportional representation

(c) A statement included in the articles of
incorporation that all a designated voting
group of shareholders are entitled to cumulate
their votes for directors (or words of similar
import) means that the shareholders designated
are entitled to multiply the number of votes they
are entitled to cast by the number of directors
for whom they are entitled to vote and cast the
product for a single candidate or distribute the
product among two or more candidates.
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Straight v. Cumulative Voting
Example Alpha 51 shares Beta 49 shares One vote
per share 5 directors to be elected

• Cumulative Voting
• Proportional representation

(c) A statement included in the articles of
incorporation that all a designated voting
group of shareholders are entitled to cumulate
their votes for directors (or words of similar
import) means that the shareholders designated
are entitled to multiply the number of votes they
are entitled to cast by the number of directors
for whom they are entitled to vote and cast the
product for a single candidate or distribute the
product among two or more candidates.
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Cumulative Voting
Example Alpha 51 shares Beta 49 shares One vote
per share 5 directors to be elected
Alpha 51 x 5 255 votes Beta 49 x 5 245 votes
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Cumulative Voting
Example Alpha 51 shares Beta 49 shares One vote
per share 5 directors to be elected
Alpha 51 x 5 255 votes Beta 49 x 5 245 votes
Betas Voting Bob 122 votes Betty 123
votes How many directors can Alpha elect?
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Cumulative Voting

• Alpha 51 Class A shares 3 votes per share
• Beta 49 Class B shares 1 vote per share
• 5 directors to be elected

(c) A statement included in the articles of
incorporation that all a designated voting
group of shareholders are entitled to cumulate
their votes for directors (or words of similar
import) means that the shareholders designated
are entitled to multiply the number of votes they
are entitled to cast by the number of directors
for whom they are entitled to vote and cast the
product for a single candidate or distribute the
product among two or more candidates.
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Cumulative Voting

• Alpha 51 Class A shares 3 votes per share
• Beta 49 Class B shares 1 vote per share
• 5 directors to be elected
• Alpha (51 x 3) x 5 765 votes
• Beta 49 x 5 245 votes

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Default Rules

• Del. 214, MBCA 7.28(b)
• Opt-in
• No cumulative voting unless in articles
• Nebraska corporations
• Mandatory
• NEB. CONST. art. XII, section 1

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Problem 2 (p. 213)

• Villar v. Kernan
• Villar owned 48 of stock
• Three directors
• Villar was not a director (See note , p. 211)
• Did Ricettas have cumulative voting?

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Problem 3.1 (p. 214)

• Bubbas Burritos
• 1000 shares outstanding
• 9 directors to be elected
• Cumulative voting
• How many shares required to elect Epstein?

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Problem 3.1 (p. 214)

• Bubbas Burritos
• 1000 shares outstanding
• 9 directors to be elected
• Cumulative voting
• How many shares required to elect Epstein?
• How many shares to elect both Epstein and Roberts?

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Problem 3.2 (p. 214)

• Bubbas Burritos
• 1000 shares to be voted
• 3 directors to be elected
• Cumulative voting
• How many shares required to elect Epstein?