Shareholder Meetings in Washington State
As a shareholder in a corporation it is important to know your rights. One of those rights is the right to attend shareholder meetings. Today we will discuss the frequency and type, notice requirements, and voting protocol of shareholder meetings in Washington State.
Washington corporations are governed by the Washington Business Corporation Act, which is codified in RCW 23B. Shareholder meetings are specifically outlined in RCW 23B.07.
Frequency and Type of Shareholder Meeting
The two types of meetings that shareholders attend are “annual” and “special” meetings. RCW 23B.07.010 lays out the requirements for annual shareholder meetings and is summarized as follows:
1) Corporations must hold an annual shareholder meeting;
2) Meetings can be held in or out of state but if the place is not stated in the bylaws, then the meeting shall be held at the corporation’s principal office;
3) The failure to hold an annual meeting at the time stated in the bylaws doesn’t affect the validity of any corporate action taken at a meeting; and
4) Instead of meeting in person, shareholders can agree on decisions through “written consent,” which is simply a document where shareholders agree to certain corporate actions. For example, shareholders could sign a written consent to re-elect Joe Smith to be the sole board member of the company.
It’s important to note that even though a meeting a may be held at a physical location, RCW 23B.07.080 allows shareholders to participate by “any means of communication by which all persons participating in the meeting can hear each other during the meeting” (i.e., phone, video conference).
Shareholders may also call “special meetings” under RCW 23B.07.020. Under this statute, shareholder meetings may be requested by:
1) The board of directors or anyone authorized by the articles of incorporation or bylaws; or
2) Shareholders who hold at least 10% of votes entitled to be cast on any issues under consideration at the meeting.
It is important to note that non-public companies may increase the 10% requirement up to 25%.
A corporation must notify shareholders of the date, time, and place of each annual and special shareholder’s meeting. The notice must be given between 10-60 days before the meeting date, except for shareholder meetings where the shareholders will consider certain major actions: an amendment to the articles of incorporation, a plan of merger or share exchange, a proposed sale of assets pursuant to RCW 23B.12.020, or the dissolution of the corporation. If the shareholder meeting will consider one of the major actions listed, notice must be given at least 20 and no more than 60 days before the meeting date.
Notice for a special meeting must state the purpose for which the meeting is called, while notice for an annual meeting does not.
Unless the articles of incorporation provide otherwise, each share, regardless of class, is entitled to one vote on each matter voted on at a shareholders’ meeting. Additionally, a shareholder may vote their shares in person or by proxy. A proxy is a ballot cast by one person on behalf of another. One of the benefits of being a shareholder is the right to vote on certain corporate matters. Since many shareholders (especially of public corporations) cannot or do not want to attend the annual and special meetings at which the voting occurs, corporations provide shareholders with the option to cast a proxy vote. Shareholders receive a proxy ballot in the mail along with an informational booklet called a proxy statement describing the issues to be voted on. Shareholders return a form by mail agreeing to have their vote cast by proxy. Issues commonly decided by proxy vote include electing directors to the board, approving a merger or acquisition, and approving a stock compensation plan.
Unless the articles of incorporation require a greater number of votes, a shareholders meeting must only have a quorum (majority of shareholders) present to vote and then a majority of those present must approve an action. This means that if 51% of shareholders show up to a meeting, a quorum is present, and then 51% of those present must approve an action put forth in the meeting. However, the statutory requirements for electing directors are slightly different in Washington, which by default provide for cumulative voting (we won’t dive into cumulative voting in this post but you can read further about it here).
At shareholder meetings, there are a number of different items that may be voted on and discussed. In a future post, we will outline each item shareholders are entitled to vote upon as outlined in RCW 23B and how those decisions may affect the company.
As a shareholder in a corporation, knowing your rights is fundamental to your role. Fortunately for us, the requirements for shareholder meetings in Washington State are neatly codified in RCW 23B.07.
If you have questions about holding shareholder meetings in Washington state, please feel free to contact us today.