Quiz 28: Corporate Governance and the Sarbanes-Oxley Act
Yes , the company O can force company DA to hold the shareholder's meeting earlier. The purpose of annual shareholder meeting is to choose independent auditors, elect directors and to take some other important actions. The Model Business Corporations Act (MBCA) provides shareholders the right to file a petition in court for obtaining orders for holding such meeting earlier than their stipulated time. In this case the annual shareholder meeting did not happened for almost one and a half years and therefore company O can obtain a court order for forcing company DA to hold the meeting at some earlier date. Since annual shareholder's meetings are very important therefore MBCA gives a right to the shareholders through which they can force the organizations to hold the meeting on annual basis.
Facts of the Case The case is related to Special meeting of Shareholders. RPH Center, Inc had JCS as one of the key shareholders and member of Board of Directors. After the completion of four years of the hospital the board of directors started having concerns over the working of the facility. There was a split between them because of the concerns. Out of 6 directors, 3 were on one side and 3 were on the other side. In order to resolve the issue, JCS who was the shareholder of 10 percent in the voting rights of the company decided to arrange a meeting with the board of directors. He asked the company's secretary to arrange the same. The secretary forwarded a notice to each of the shareholders mentioning that a special meeting of the shareholders would be taking place for electing directors. The meeting took place as scheduled. However some of the shareholders filed a suit contending improper calling up of the special shareholder's meeting. Issue concerning the case The issue is who wins this case. Findings and Decision of the court The trial court found that the election of the directors is null and void and therefore the conduct of the board of directors seems to be invalid. The court stated that the board of directors did not satisfy their role for the purpose for which the meeting was called as they deliberately tried to lessen the number of directors. The Appellate division "however changed this verdict that the notice for calling the directors was proper and the number of directors on RPH's board was set up by them before the start of such conduct and therefore 3 non present directors constitute as hold over directors". But the court of appeals reversed this verdict and did not agree that the number of directors were decided by the parties before the conduct. Therefore the directors were asked to vacate the board and their actions are hereby declared null and void.
, Mr G and Mr S cannot revoke their proxies. TEX. BUS.CORP.ACT ANN. art. 2.29 C (Vernon 1980) governs irrevocable proxies. It states that an irrevocable proxy should: 1) Expressly state that it is irrevocable, or 2) It must be made irrevocable by law. In this case, the agreement which Mr G and Mr S signed clearly states that the proxy is intended to be irrevocable for a period of 10 years. Furthermore, this proxy is irrevocable by law therefore it is quite clear that Mr G and Mr S are wrong in revoking their proxies.