How Not To Take Valid Shareholder Action

Allen Matkins
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Allen Matkins

Leo Tolstoy's Anna Karenina begins with this famous line:

"Happy families are all alike; every unhappy family is unhappy in its own way."

The same might be true of shareholder meetings.  In general, there is only one way to get them right but a number of ways to get them wrong. Here are some ways to err:

First, the meeting may not have been validly called.  Under Section 600(d) the California Corporations Code, only limited categories of persons may call a special meeting: the board, the chairperson of the Board, the president, the holders of shares entitled to cast not less than 10% of the votes at the meeting, or any additional persons  as may be provided in the articles or bylaws.

Second, notice of the meeting may not have been given within the time periods specified in Section 601(a).

Third, the notice of the meeting may not include the information required by Section 601(a).

Fourth, the notice of the meeting may not have been given in the manner required by Section 601(b).  

Fifth, the notice of the meeting may not state the general nature of the proposal if the approval relates to a vote pursuant to Section 310, 902, 1152, 1201, 1900, or 2007.  

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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