Proxy Contract: Everything You Need to Know
A proxy contract is necessary if you want to have another person act on your behalf in a corporate matter.3 min read
2. Proxy Voting
4. Designation of Proxy
5. Exercise of Voting Rights
6. Action Upon Approval
7. Limitations on Liability
A proxy contract is necessary if you want to have another person act on your behalf in a corporate matter. This is a useful tool if you live a far distance from where the stockholder’s meetings are held, you have other business to tend to, you cannot physically get to the voting location, or if you simply cannot be there for any reason.
The Definition of a Proxy Agreement
A proxy agreement is an agreement that allows a person to do legal tasks for another person. Proxy agreements are commonly seen in stock voting, in which a person gives another person permission to vote on their behalf.
In many cases, the power of the stockholder to vote can be granted to a proxy. It is a simple agreement that lets one person represent someone else.
Proxy voting is commonly used during legislative voting. It is only permitted if the legislative body as decided to use it during the proceedings.
With regard to corporate law, proxy refers to the authority to make stock votes. It is provided in the corporate charter and bylaws of the corporation. If the authority is not stated in the company charter, a proxy cannot be used. The owner of the stock that has his or her name registered with the corporation is the only one who can delegate his or her right to vote.
Unless it is required, there is no form you need to use to vote as a proxy. However, there has to be evidence that the proxy is allowed to vote.
A proxy is still valid even if there are errors or other problems with the document. In general, anyone who is a stockholder with power at a corporate meeting can delegate that power to a proxy.
A proxy may vote on normal corporate business matters. The proxy may not vote on major corporate matters, like a merger, without explicit authority.
Anything the proxy does within his or her authority is bound by the stockholder just as if he or she acted at the meeting in person.
A proxy may be removed whenever the stockholder sees fit unless it is being made irrevocable. If the stockholder decides to sell his or her shares in a company, it automatically removes any proxies that were given the right to vote.
Proxies can also be revoked if the stockholder attends the meeting himself. A stockholder in a company may act as a proxy for another stockholder, but is not a requirement.
Designation of Proxy
To designate a proxy, a shareholder has to appoint a proxy and provide complete power of substitution for that person to vote on his or her behalf at a shareholder meeting held by the company.
Exercise of Voting Rights
- Voting discretion- the proxy is allowed to vote and otherwise act on any other right given to the stockholder at a meeting. The proxy is given the consent to deal with any action required of the company.
- Action requiring previous approval- a proxy cannot do certain things without written permission from the shareholder. This includes making a sale of assets belonging to the company, consolidating, reorganizing, or dissolving the company.
Action Upon Approval
When provided with a written request, and proxy can take certain actions that authorize or approve any action requiring prior approval. The proxy must discuss anything dealing with those actions with the shareholder or she won’t have all the necessary information to ensure that any action taken will be legal.
Anything that the proxy does with regard to the company without the written approval of the shareholder is considered void.
Limitations on Liability
If the shareholder has not left any instructions for the proxy, he or she has to act for the shareholder according to his or her best judgment. The proxy will not be responsible for any action taken against the shareholder after making his or her judgment call.
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