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Corporations • Rights of Shareholders
CORP#044
Legal Definition
Proxies are revocable unless they are (1) labeled irrevocable, or (2) coupled with an interest (e.g., the shares were sold).
Plain English Explanation
Generally speaking, a proxy exists at the pleasure of the shareholder and can be fired at any time by revoking the permission given to them to vote on the shareholder's behalf. However, there are two circumstances where the shareholder cannot terminate their proxy:
(1) If the shareholder specifically designates the proxy as being "irrevocable;" or
(2) if the proxy holder has some sort of interest in the shares. For example, if someone has agreed to loan a shareholder money in exchange for the right to be their proxy, then the shareholder may not later deprive the proxy of the value of what they loaned money for.
(1) If the shareholder specifically designates the proxy as being "irrevocable;" or
(2) if the proxy holder has some sort of interest in the shares. For example, if someone has agreed to loan a shareholder money in exchange for the right to be their proxy, then the shareholder may not later deprive the proxy of the value of what they loaned money for.
Hypothetical
Hypo 1: HypoCorp has a shareholder meeting scheduled for May 1st and has set a record date for April 1st. Bob owns 1,000 shares of HypoCorp. On April 3rd, Bob offers to sell his shares to Sam. Sam is interested, but only if he can participate in the shareholder meeting. Bob tells Sam, "If you agree to buy my shares, I will give you my proxy right." Sam agrees. Result: Bob has given Sam irrevocable proxy power, because the power was coupled with Sam's interest in purchasing the shares. If you're confused by this card a bit, make sure to look up the record date card, which will explain that there is a cut off date for deciding who has the right to participate in a shareholder meeting and, in this hypo, Sam would have missed that cut off date when he agreed to purchase the shares.
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