Republic of New Lemuria

Business Corporation Ordinance 1991

An Ordinance to provide for the establishment of business corporations in the Republic of New Lemuria and to provide for matters incidental or consequential thereto. (continued) Part VI Directors and Management Management of Business of Corporation 44. Subject to limitations of the articles of incorporation and of this Ordinance as to action which shall be authorized or approved by the shareholders, all corporate powers shall be exercised by or under authority of, and the business and affairs of every corporation shall be managed by, a board of directors. Qualification of Directors 45. The articles of incorporation may prescribe special qualifications for directors. Unless otherwise provided in the articles of incorporation, directors may be natural persons, or corporations, of any nationality and need not be residents of the Republic of New Lemuria or shareholders of the corporation. Alternate or substitute directors may be appointed provided that the terms and conditions under which such appointments shall be made are set forth in the articles of incorporation or bylaws. Number of Directors 46. (1) the number of directors constituting the entire board shall not be less than three, except that where all the shares of a corporation are held by fewer than three shareholders, the number of directors may be fewer than three but not fewer than the number of shareholders. Subject to such limitations, such number may be fixed by the bylaws, by the shareholders, or by action of the board under the specific provisions of a bylaw. If not otherwise fixed under this section, the number shall be three. (2) The number of directors may be increased or decreased by amendment of the bylaws, by the shareholders, or by action of the board under the specific provisions of a bylaw, subject to the following limitations: (i) If the board is authorized by the bylaws to change the number of directors, whether by amending the bylaws or by taking action under the specific provisions of a bylaw, such amendment or action shall require the vote of a majority of the entire board; and, (ii) No decrease shall shorten the term of any incumbent director. Election and Term of Directors 47. (1) At each annual meeting of shareholders, directors shall be elected to hold office until the next annual meeting except as otherwise provided in this Ordinance or in the articles of incorporation. The articles of incorporation may provide for the election of one or more directors by the holders of the shares of any class or series. (2) Each director shall hold office until the expiration of the term for which he is elected, and until his successor has been elected and qualified. Classification of Directors 48. (1) At each annual meeting of shareholders, directors shall be elected to hold office until the next annual meeting except as otherwise provided in this Ordinance or in the articles of incorporation. The articles of incorporation may provide for the election of one or more directors by the holders of the shares of any class or series. (2) Each directors shall hold office until the expiration of the term for which he is elected, and until his successor has been elected and qualified. (3) If directors are classified and the number of directors is thereafter changed: (i) Any newly created directorships or any decrease in directorships shall be so apportioned among the classes as to make all classes as nearly equal in number as possible; and, (ii) When the number of directors is increased by the board and any newly created directorships are filled by the board, there shall be no classification of the additional directors until the next annual meeting of shareholders. Newly Created Directorships and Vacancies 49. (1) Newly created directorships resulting from an increase in the number of directors and vacancies occurring in the board for any reason except the removal of directors without cause may be filled by vote of a majority of the directors then in office, although less than a quorum exists, unless the articles of incorporation or the bylaws provide that such newly created directorships or vacancies shall be filled by vote of the shareholders. (2) Unless the articles of incorporation or the specific revisions of a bylaw adopted by the shareholders provide that the board shall fill vacancies occurring in the board by reason of the removal of directors without cause, such vacancies may be filled only by vote of the shareholders. (3) A director elected to fill a vacancy shall be elected to hold office for the unexpired term of his predecessor. Removal of Directors 50. (1) Any or all of the directors may be removed for cause by vote of the shareholders. The articles of incorporation or the specific provisions of a bylaw may provide for such removal by action of the board, except in the case of any director elected by cumulative voting, or by the holders of the shares of any class or series when so entitled, or by provisions of the articles of incorporation. (2) If the articles of incorporation or the bylaws so provide, any or all of the directors may be removed without cause by vote of the shareholders. (3) The removal of directors with or without cause, as provided in subsections (1) or (2) is subject to the following: (i) In the case of a corporation having cumulative voting, no director may be removed when the votes cast against his removal would be sufficient (ii) When by the provisions of the articles of incorporation the holders of the shares of any class or series, or holders of bonds, voting as a class, are entitled to elect one or more directors, any director so elected may be removed only by the applicable vote of the holders of the shares of that class or series, or the holders of such bonds, voting as a class. Quorum; Action by the Board 51. (1) Unless a greater proportion is required by the articles of incorporation, a majority of the entitled board present, in person or by proxy, at a meeting duly assembled, shall constitute a quorum for the transaction of business or of any specified item of business, except that the articles of incorporation or the bylaws shall not require unanimity and may fix the quorum at less than a majority of the entire board but not less than one-third thereof. (2) The vote of the majority of the directors present in person or by proxy at a meeting at which a quorum is present shall be the act of the board unless the articles of incorporation require the vote of a greater number. (3) A proxy shall be given in an instrument in writing including a telegram, cable, telex or similar teletransmission. (4) Unless otherwise restricted by the articles of incorporation or bylaws, any action required or permitted to be taken at any meeting of the board of directors or of any committee thereof may be taken without a meeting if all members of the board or committee, as the case may be, consent thereto in writing and the writing or writings are filed with the minutes of the proceedings of the board or committee. (5) Unless restricted by the articles of incorporation or bylaws, members of the board or any committee thereof may participate in a meeting of such board or committee by means of conference telephone, video, or similar communication equipment by means of which all persons participating in the meeting can hear each other, and participation in a meeting pursuant to this section constitute presence in person at such meeting. (6) The articles of incorporation may contain provisions specifying either or both of the following: (i) That the proportion of directors that shall constitute a quorum for the transaction of business or of any specified item of business shall be greater than the proportion prescribed by subsection (1) in the absence of such provision but less than the total number of directors; and, (ii) That the proportion of votes of directors that shall be necessary for the transaction of business or of any specified item of business shall be greater than the proportion prescribed by subsection (2) in the absence of such provisions but less than the total number of directors. (7) An amendment of the articles of incorporation which adds a provision permitted by subsection (6) or which changes or strikes out such a provision, shall be authorized at a meeting of shareholders by vote of the holders of two-thirds of all outstanding shares entitled to vote thereon, or of such greater proportion of shares, or class or series of shares, as may be provided specifically in the articles of incorporation for adding, changing, or striking out a provision permitted by subsection (6). Meetings of the Board of Directors 52.(1) Meetings of the board, regular or special, may be held at any place within or without the Republic of New Lemuria, unless otherwise provided by the articles of incorporation or by the bylaws. The time and place for holding meetings of the board may be fixed by or under the bylaws, or if not so fixed, by the board. (2) Unless otherwise provided by the bylaws, regular meetings of the board may be held without notice if the time and place of such meetings are fixed by the bylaws or the board. Special meetings of the board may be called in the manner provided in the bylaws and shall be held upon notice to the directors. The bylaws may prescribe what shall constitute notice of meeting of the board. A notice or waiver of notice need not specify the purpose of any regular or special meeting of the board, unless required by the bylaws. (3) Notice of a meeting need not be given to any director who submits a signed waiver of notice whether before or after the meeting, or who attends the meeting without protesting the lack of notice. Executive and Other Committees 53. (1) If the articles of incorporation or the bylaws so provide, the board, by resolution adopted by a majority vote of the entire board, may designate from among its members, an executive committee and other committees, each of which to the extend provided in the resolution or in the articles of incorporation or bylaws of the corporation, shall have and may exercise all the authority of the board of directors, but no such committee shall have the authority as to the following matters: (i) The submission to shareholders of any action that requires shareholders' authorization under this Ordinance; (ii) The filling of vacancies in the board of directors or in a committee; (iii) The fixing of compensation of the directors for serving on the board or on any committee; (iv) The amendment or repeal of the bylaws, or the adoption of new bylaws; and, (v) The amendment or repeal of any resolution of the board which by its terms shall not be so amendable or repealable. (2) Each such committee shall serve at the pleasure of the board. The designation of any such committee and the delegation thereto of authority shall not alone relieve any director of his duty to the corporation under this Part VI. Director Conflicts of Interest. 54.(1) No contract or other transaction between a corporation and one or more of its directors, or between a corporation and any other corporation, firm, association or other entity in which one or more of its directors are directors or officers who have a substantial financial interest, shall be either void or voidable for this reason alone or by reason alone that such director or directors are present at the meeting of the board, or of a committee thereof, which approves such contract or transaction, or that his or their votes are counted for such purpose: (i) If the material facts as to such director's interest in such contract or transaction and as to any such common directorship, officership or financial interest are disclosed in good faith or known to the board or committee, and the board or committee approves such contract or transactions by a vote sufficient for such purpose without counting the vote of such interested director or, if the votes of the disinterested directors are insufficient to constitute an act of the board as defending this Part VI, by unanimous vote of the disinterested directors; or, (ii) If the material facts as to such director's interest in such contract or transaction and as to any such common directorship, officership or financial interest are disclosed in good faith or known to the shareholders entitled to vote thereon, and such contract or transaction is approved by vote of such shareholders. (2) Common or interested directors may be counted in determining the presence of a quorum at a meeting of the board or of a committee which approves such contract or transaction. (3) The articles of incorporation may contain additional restrictions on contracts or transaction between a corporation and its directors and may provide that contracts or transactions in violation of such restrictions shall be void or voidable by the corporation. (4) Unless otherwise provided in the articles of incorporation or the bylaws, the board shall have authority to fix the compensation of directors for service in any capacity. Loans to Directors 55. A loan shall not be made by a corporation to any director unless it is authorized by vote of the shareholders. For this purpose, the shares of the director to whom the loan is to be made shall not be shares entitled to vote. A loan made in violation of this section shall be a violation of the duty to the corporation of the directors approving it, but the obligation of the borrower with respect to the loan shall not be affected thereby. Indemnification of Directors and Officers 56.(1) A corporation shall have power to indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding whether civil, criminal, administrative or investigative (other than an action by or in the right of the corporation) by reason of the fact that he is or was a director or officer of the corporation, or is or was serving at the request of the corporation as a director or officer of another corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by him in connection with such action, suit or proceeding if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interest of the corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful. The termination of any action, suit or proceeding by judgment, order settlement, conviction, or upon a plea of no contest, or its equivalent, shall not of itself, create a presumption that the person did not act in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the corporation, and with respect to any criminal action or proceeding, had reasonable cause to believe that his conduct was unlawful. (2) A corporation shall have power to indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the corporation to procure a judgment in its favor by reason of the fact that he is or was a director or officer of the corporation or is or was serving at the request of the corporation as a director or officer of another corporation, partnership, joint venture, trust or the enterprise against expenses (including attorneys' fees) actually and reasonably incurred by him or in connection that the defense or settlement of such action or suit if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the corporation and except that no indemnification shall be made in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable for negligence or misconduct in the performance of his duty to the corporation unless and only to the extent that the court in which such action or suit was brought shall determine upon application that, despite the adjudication of liability; but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which the court shall deem proper. (3) To the extent that a director or officer of a corporation has been successful on the merits or otherwise in defense of any action, suit or proceeding referred to in subsections (1) or (2), or in the defense of a claim, issue or matter therein, he shall be indemnified against expenses (including attorneys' fees) actually and reasonably incurred by him in connection therewith. (4) Expenses incurred in defending a civil or criminal action, suit or proceeding may be paid in advance of the final disposition of such action, suit or proceeding as authorized by the board of directors in the specific case upon receipt of an undertaking by or on behalf of the director or officer to repay such amount unless it shall ultimately be determined that he is entitled to be indemnified by the corporation as authorized in this action. (5) A corporation shall have power to purchase and maintain insurance on behalf of any person who is or was a director or officer of the corporation or is or was serving at the request of the corporation as a director or officer against any liability asserted against him and incurred by him in such capacity whether or not the corporation would have the power to indemnify him against such liability under the provisions of this section. Standard of Care to be Observed by Directors and Officers 57. Directors and officers shall discharge the duties of their respective positions in good faith and with that degree of diligence, care and skill which ordinarily prudent men would exercise under similar circumstances in like positions. In discharging their duties, directors and officers, when acting in good faith, may rely upon financial statements of the corporation represented to them to be correct by the president, managing director or the officer of the corporation having charge of its books or accounts, or stated in a written report by an independent public or certified public accountant or firm of such accountants fairly to reflect the financial condition of such corporation. Officers 58. (1) Every corporation shall have (i) a president and treasurer, or a managing director, and (ii) a secretary, who shall each be appointed by the board or in the manner directed by the articles of incorporation or the bylaws. Such other officers shall be appointed as are required by the articles of incorporation or the bylaws. Such other officers shall be appointed as are required by the articles or the bylaws or as the board may determine are desirable or necessary to carry on the business of the corporation. All officers shall be natural persons except the secretary which may be a corporation. (2) The articles of incorporation may provide that all officers or that specified officers shall be elected by the shareholders instead of by the board. (3) Unless otherwise provided in the articles of incorporation or bylaws, all officers shall be elected or appointed to hold office until the meeting of the board following the next annual meeting of shareholders, or in the case of officers elected by the shareholders, until the next annual meeting of the shareholders. (4) Each officer shall hold office for the term for which he is elected or appointed, and until his successor has been elected or appointed and qualified. (5) Any two or more offices may be held by the same person unless the articles of incorporation or bylaws otherwise provide. (6) The board may require any officer to give security for the faithful performance of his duties. (7) All officers as between themselves and the corporation shall have such authority and perform such duties with respect to the management of the corporation as may be provided in the bylaws or, to the extent not so provided, by the board (8) Officers may be of any nationality and need not be residents of the Republic of New Lemuria. Removal of Officers 59. (1) Any officer elected or appointed by the board may be removed by the board with or without cause except as otherwise provided in the articles of incorporation or the bylaws. An officer elected by the shareholders may be removed with or without cause, only by vote of the shareholders, but his authority to act as an officer may be suspended by the board for cause. (2) The removal of an officer without cause shall be without prejudice to his contract rights, if any. The election or appointment of an officer shall not of itself create contract rights. Part VII Shareholders 60. (1) Meetings of shareholders may be held at such place, either within or without the Republic of New Lemuria, as may be designated in the bylaws. (2) An annual meeting of shareholders shall be held for the election of directors on a date and at a time designated by or in the manner provided in the bylaws. Any other proper business may be transacted at the annual meeting. (3) A failure to hold the annual meeting at the designated time or to elect a sufficient number of directors to conduct the business of the corporation shall not affect otherwise valid corporate acts or cause a dissolution of the corporation except as may be otherwise specifically provided in this Ordinance. If the annual meeting for election of directors is not held on the date designated therefor, the directors shall cause the meeting to be held as soon thereafter as convenient. If there is a failure to hold the annual meeting for a period of ninety days after the date designated therefor, or if no date has been designated for a period of thirteen months after the organization of the corporation or after its last annual meeting, holders of not less than ten percent of the shares entitled to vote in an election of directors may, in writing, demand the call of a special meeting specifying the time thereof, which shall not be less than two nor more than three months from the date of such call. The secretary of the corporation upon receiving the written demand shall promptly give notice of such meeting, or if he fails to do so within five business days thereafter, any shareholders signing such demand may give such notice. (4) Special meetings of the shareholders may be called by the board of directors by such person or persons as may be authorized by the articles of incorporation or by the bylaws. (5) The articles of incorporation or the bylaws may provide that elections of directors shall be by written ballot. Notice of Meetings of Shareholders 61. (1) Whenever under the provisions of this Ordinance shareholders are required or permitted to take any action at a meeting, written notice to them shall state the place, date and hour of the meeting and, unless it is the annual meeting, indicate that it is being issued by or at the direction of the person or persons calling the meeting. Notice of special meeting shall also state the purpose for which the meeting is called. (2) A copy of the notice of any meeting shall be given personally or sent by mail, telegraph, cable gram, telex or teleprinter or other written teletransmission not less than fifteen nor more than sixty days before the date of the meeting, to each registered shareholder entitled to vote at such meeting. If mailed , such notice is given when deposited in the mail directed to the shareholder at his address as it appears on the record of shareholders, or , if he shall have filed with the secretary of the corporation a written request that notices to him be mailed to some other address, then directed to him at such address. (3) Notice of any meeting shall be given to shareholders of bearer shares in accordance with the provisions of the articles of incorporation or the bylaws, or this Ordinance. The notice shall include a statement of the conditions under which shareholders may attend the meeting and exercise the right to vote. (4) When a meeting is adjourned to another time or place, it shall not be necessary, unless the meeting was adjourned for lack of a quorum or unless the bylaws require otherwise, to give any notice of the adjourned meeting if the time and place to which the meeting is adjourned are announced at the meeting at which the adjournment is taken. At the adjourned meeting, any business may be transacted that might have been transacted on the original date of the meeting. However, if after the adjournment the board fixes a new record date entitled to notice under subsection (1) of this section 61. Waiver of Notice 62. Notice of a meeting need not be given to any shareholder who submits a signed waiver of notice, in person or by proxy, whether before or after the meeting. The attendance of any shareholder at a meeting, in person or by proxy, without protest, the lack of notice of such meeting prior to the conclusion of the meeting shall constitute a waiver of notice by him. Action by Shareholders Without a Meeting 63. Any action required by this Ordinance to be taken at a meeting of shareholders of a corporation, or any action which may be taken at a meeting of the shareholders, may be taken without a meeting if a consent in writing, setting forth the action so taken, is signed by all the shareholders entitled to vote with respect to the subject matter thereof. Such consent shall have the same effect as a unanimous vote of shareholders, and may be stated as such in any articles or documents filed with the Registrar of Companies under this Ordinance. Fixing Record Date 64. For the purpose of determining the shareholders entitled to notice of or to vote at any meeting of shareholders or any adjournment thereof, or to express consent to or dissent from any proposal without a meeting, or for the purpose of determining shareholders entitled to receive payment of any dividend or the allotment of any rights, or for the purpose of any other action, the bylaws may provide for fixing, or in the absence of such provision, the board may fix, in advance a date as the record date for any such determination of shareholders. Such date shall not be more that sixty nor less than fifteen days before the date of such meeting, nor more than sixty days prior to any other action. Proxies 65. (1) Every shareholder entitled to vote at a meeting of shareholders or to express consent or dissent without a meeting may authorize another person to act for him by proxy. (2) Every proxy must be signed by the shareholder or his attorney-in-fact. No proxy shall be valid after the expiration of eleven months from the date thereof unless otherwise provided in the proxy. Every proxy shall be revocable at the pleasure of the shareholder executing it, except as otherwise provided in this section. (3) The authority of the holder of a proxy to act shall not be revoked by the incompetence or death of the shareholders who executed the proxy unless, before the authority is exercised, written notice of any adjudication of such incompetence or of such death is received by the corporate officer responsible for maintaining the list of shareholders. (4) Except when other provisions shall have been made by written agreement between the parties, the record holders of shares which are held by a pledgee as security or which belong to another, upon demand therefor and payment of necessary expenses thereof, shall issue to the pledgee or to such owner of such shares a proxy to vote or take other action thereon. (5) A shareholder shall not sell his vote, or issue a proxy to vote to any person for any sum of money or anything of value except as authorized in this subsection and Section 71. hereof. (6) A proxy which is entitled "irrevocable proxy" and which states that it is irrevocable, is irrevocable if and as long as it is coupled with an interest sufficient to support an irrevocable power, including when it is held by any of the following or a nominee of any of the following: (i) A pledgee; (ii) A person who has purchased or agreed to purchase the shares; (iii) A creditor of the corporation who extends or continues credit to the corporation in consideration of the proxy if the proxy states that it was given in consideration of such extension or continuation of credit, the amount thereof, and the name of the person extending or continuing credit; and, (iv) A person who has contracted to perform services as an officer of the corporation, if a proxy is required by the contract of employment, if the proxy states that it was given in consideration of such contract of employment, the name of the employee and the period of employment contracted for. (7) Notwithstanding a provision in a proxy stating that it is irrevocable, the proxy becomes revocable after the pledge is redeemed, or the debt of the corporation is paid, or the period of employment provided for in the contract of employment has terminated, and becomes revocable, in a case provided for in subsections (iii) and (iv) of paragraph (6) of this section, at the end of the period, if any specified therein as the period during which it is irrevocable, or three years after the date of the proxy, whichever period is less, unless the period of irrevocability is renewed from time to time by the execution of a new irrevocable proxy as provided in this section. This paragraph does not affect the duration of a proxy under subsection (2) hereof. (8) A proxy may be revoked, notwithstanding a provision making it irrevocable, by a purchaser of shares without knowledge of the existence of the provision unless the existence of the proxy and its irrevocability is noticed conspicuously on the face or back of the certificate representing such shares. Quorum of Shareholders 66. (1) Unless otherwise provided in the articles of incorporation, a majority of shares entitled to vote, represented in persons or by proxy, shall constitute a quorum at a meeting of shareholders, but in no event shall a quorum consist of fewer than one-third of the shares entitled to vote at a meeting. (2) When a quorum is once present to organize a meeting, it is not broken by the subsequent withdrawal of any shareholders. (3) The shareholders present may adjourn the meeting despite the absence of a quorum. Vote of Shareholders Required 67. (1) Directors shall, except as otherwise required by this Ordinance or by the articles of incorporation as permitted by this Ordinance, be elected by a plurality of the votes cast at a meeting of shareholders by the holders of shares entitled to vote in the election. (2) The articles of incorporation of any corporation may provide that in all elections of directors of such corporation each shareholder shall be entitled to as many votes as shall equal the number of votes which, except for such provision as to cumulative voting, he would be entitled to cast for the election of directors with respect to his shares multiplied by the number of directors to be elected, and that he may cast all of such votes for a single director or may distribute them among the number to be voted for, or any two or more of them, as he may see fit. This right, when exercised, shall be termed cumulative voting. (3) Whenever any corporate action, other than the election of directors is to be taken under this Ordinance by vote of the shareholders, it shall, except as otherwise required by this Ordinance or by the articles of incorporation as permitted by this Ordnance, be authorized by a majority of the votes cast at a meeting of shareholders by holders of shares entitled to vote thereon. Greater Requirement as to Quorum and Vote of Shareholders 68. (1) The articles of incorporation may contain a provision specifying either or both of the following: (i) That the proportion of shares, or the proportion of shares of any class or series thereof, the holders of which shall be present in person or by proxy at any meeting of shareholders in order to constitute a quorum of the transaction of any business or of any specified item of business, including amendments to the articles of incorporation, shall be greater than the proportion prescribed by this Ordinance in the absence of such provision; and, (ii) That the proportion of votes of the holders of shares, or of the holders of shares of any class or series thereof, that shall be necessary at any meeting of shareholders for the transaction of any business or of any specified item of business, including amendments to the articles of incorporation, shall be greater than the proportion prescribed by this Ordinance in the absence of such provision. (2) An amendment of the articles of incorporation which adds a provision permitted by this section or which changes or strikes out such a provision, shall be authorized at a meeting of shareholders by vote of the holders of two-thirds of all outstanding shares entitled to vote thereon, or of such greater proportion of shares, or class or series of shares, as may be provided specifically in the articles of incorporation for adding, changing, or striking out a provision permitted by this section. (3) If the articles of incorporation of any corporation contain a provision authorized by this section, the existence of such provision shall be noted on the face or back of every certificate for shares issued by such corporation. List of Shareholders at Meetings 69. A list of registered shareholders as of the record date, and of holders of bearer shares who as of the record date have qualified for voting, certified by the corporate officer responsible for its preparation or by a transfer agent, shall be produced at any meeting of shareholders upon request of any shareholder at the meeting or prior thereto. If the right to vote at any meeting is challenged, the inspector of election, or person presiding thereat, shall require such list of shareholders to be produced as evidence of the right of the persons challenged to vote at such meeting, and all persons who appear from such list to be shareholders entitled to vote thereat may vote at such meeting. Qualification of Voters 70. (1) Every registered shareholder as of the record date and every holder of bearer shares who, as of the record date, has qualified for voting, shall be entitled at every meeting of shareholders to one vote for every share standing in his name, unless otherwise provided in the articles of incorporation. (2) Treasury shares are not shares entitled to vote or to be counted in determining the total number of outstanding shares. (3) Shares of a parent corporation held by a subsidiary corporation are not shares entitled to vote or to be counted in determining the total number of outstanding shares. (4) Shares held by an administrator, executor, guardian, conservator, committee, or other fiduciary, except a trustee, may be voted by him, either in person or by proxy, only after the shares have been transferred into his name as trustee or into the name of his nominee. (5) Shares by or under the control of a receiver may be voted by him without the transfer thereof into his name if authority so to do is contained in an order of the court by which such receiver was appointed. (6) A shareholder whose shares are pledged shall be entitled to vote such shares until the shares have been transferred into the name of the pledgee, or a nominee of the pledgee. (7) Unless otherwise provided in, and subject to, a written agreement or the bylaws or articles of incorporation a bearer shareholder whose shares are pledged shall be entitled to vote such shares until they are delivered to the pledgee, or a nominee of the pledgee. (8) Shares in the name of another corporation of any type or kind may be voted by such officer, agent or proxy as the bylaws of such other corporation may provide, or, in the absence of such provision, as the board of such other corporation may determine. (9) The articles of incorporation may provide, except as limited by section 31 of Part V, either absolutely or conditionally, that the holder of any designated class or series of shares shall not be entitled to vote, or it may otherwise limit or define the respective voting powers of the several classes or series of shares, and, except as otherwise provided in this Ordinance, such provisions of such articles shall prevail, according to their tenor in all elections and in all proceedings, over the provisions of this Ordinance which authorize any action by the shareholders. Voting Trusts 71. (1) Any shareholder, under an agreement in writing, may transfer his shares to a voting trustee for the purpose of conferring the right to vote thereon for a period not exceeding ten years upon the terms and conditions stated therein. The certificates for shares so transferred shall be surrendered and canceled and new certificates therefor issued to such trustee stating that they are issued under such agreement, and in the entry of such ownership in the record of the corporation that fact shall also be noted, and such trustee may vote the shares so transferred during the term of such agreement. At the termination of the agreement, the shares surrendered shall be reissued to the owner in accordance with the terms of the trust agreement. (2) The trustee shall keep available for inspection by holders of voting trust certificates at his office or at a place designated in such agreement or of which the holders of voting trust certificates have been notified in writing, correct and complete books and creditors of account relating to the trust, and a record containing the names and addresses of all persons who are holders of voting trust certificates and the number and class of shares represented by the certificates held by them and the dates when they became the owners thereof. The record may be in written form or any other form capable of being converted into written form within a reasonable time. (3) A duplicate of every such agreement shall be filed in the office of the corporation and it and the record of voting trust certificate holders shall be subject to the same right of inspection by a shareholder of record or a holder of a voting trust certificate, in person or by agent or attorney, as are the records of the corporation under Part VIII of this Ordinance. (4) At any time within six months before the expiration of such voting trust agreement as originally fixed or as extended one or more times under this action, one or more holders of voting trust certificates may, by agreement in writing, extend the duration of such voting trust agreement, nominating the same or a substitute trustee, for an additional period not exceeding ten years. Such extension agreement shall not affect the rights or obligations of persons not parties thereto and shall in every respect comply with and be subject to all provisions of this Part applicable to the original voting trust agreement. Agreement Among Shareholders as to Voting 72. An agreement between two or more shareholders, if in writing and signed by the parties thereto, may provide that in exercising any voting rights, the shares held by them shall be voted as therein provided, or as they may agree, or as determined in accordance with a procedure agreed upon by them. Conduct of Shareholders' Meetings 73. (1) Unless otherwise provided in the bylaws, the board, in advance of any shareholders' meeting, may appoint one or more inspectors to act at the meeting or any adjournment thereof. If inspectors are not so appointed, the person presiding at a shareholders' meeting may , and on the request of any shareholder entitled to vote thereat shall, appoint one or more inspectors. In case any person appointed fails to appear or act, the vacancy may be filled by appointment made by the board in advance of the meeting or at the meeting by the person presiding thereat. Each inspector, before entering upon the discharge of his duties, shall take an oath faithfully to execute the duties of inspector at such meetings. (2) Unless otherwise provided in the bylaws, the inspectors shall determine the number of shares outstanding and the voting power of each, the shares represented at the meeting, the existence of a quorum, the validity and effect of proxies, and shall receive votes, ballots, or consents, hear and determine all challenges and questions arising in connection with the right to vote, count and tabulate all votes, ballots or consents, determine the results, and do such acts as are proper to conduct the election or vote with fairness to all shareholders entitled to vote. Unless waived by vote of the shareholders, the inspectors shall make a report in writing of any challenge, question or matter determined by them and execute a sworn certificate of any fact found by them. Any report or certificates made by them shall be prima facie evidence of the facts stated and of the vote as certified by them. Preemptive Rights 74. (1) Except as otherwise provided in the articles of incorporation or in this section, in the event of: (i) The proposed issuance by the corporation of shares, whether or not of the same class as those previously held, which would adversely affect the voting rights or rights to current and liquidating dividends of such holders: (ii) The proposed issuance by the corporation of securities convertible into or carrying an option to purchase shares referred to in subsection (i) of this subsection; or (iii) the granting by the corporation of any options or rights to purchase shares or securities referred to in subsection (i) or (ii) of this subsection, the holders of shares of any class shall have the rights, during a reasonable time and on reasonable terms to be determined by the board, to purchase such shares or other securities, as nearly as practicable, in such proportion as would, if such preemptive rights were exercised, preserve the relative rights to current and liquidating dividends and voting rights of such holders and at a price or prices no less favorable than the price at which such shares, securities, options or rights are to be offered to other holders. The holders of shares entitled to the preemptive right, and the number of shares for which they have preemptive rights, shall be determined by fixing a record date in accordance with section 64 of Part VII of the Ordinance. (2) Except as otherwise provided in the articles of incorporation, shareholders shall have no preemptive right to purchase: (i) Shares or other securities issued to effect a merger or consolidation; (ii) Shares or other securities issued or optioned to directors, officers, or employees of the corporation as an incentive to service or continued service with the corporation pursuant to an authorization given by the shareholders, and by the vote of the holders of the shares entitled to exercise preemptive rights with respect to such shares; (iii) Shares issued to satisfy conversion or option rights previously granted by the corporation; (iv) Treasury shares; or, (v) Shares or securities which are part of the shares or securities of the corporation authorized in the original articles of incorporation and are issued, sold or optioned within two years from the date of filing such articles. (3) The holders of shares entitled to the preemptive right shall be given prompt notice setting forth the period within which and the terms and conditions upon which such shareholders may exercise their preemptive right. Such notice shall be given personally or by mail at least fifteen days prior to the expiration of the period during which the right may be exercised. Shareholders' Derivative Actions 75. (1) An action may be brought in the right of a corporation to procure a judgment in its favor, by a holder of shares or holder of voting trust certificates of the corporation or holder of a beneficial interest in such shares or certificates. (2) In any such action, it shall be made to appear that the plaintiff is such a holder at the time of bringing the action and that he was such a holder at the time of the transaction of which he complains, or that his shares or his interest therein devolved upon him by operation of law. (3) In any such action, the complaint shall set forth with particularity the efforts of the plaintiff to secure the initiation of such action by the board of directors or the reasons for not making such effort. (4) Such action shall not be discontinued, compromised or settled, without the approval of the court having jurisdiction of the action. If the court shall determine that the interests of the shareholders or any class thereof will be substantially affected by such discontinuance, compromise, or settlement, the court, in its discretion, may direct that notice, by publication or otherwise, shall be given to the shareholders or class thereof whose interests it determines will be so affected; if notice is so directed to be given, the court may determine which one or more of the parties to the action shall bear the expense of giving such notice, in such amount as the court shall determine and find to be reasonable in the circumstances, and the amount of such expense shall be awarded as special costs of the action and recoverable in the same manner as statutory taxable costs. (5) If the action on behalf of the corporation was successful, in whole or in part, or if anything was received by the plaintiff or claimant as a result of a judgment, compromise or settlement of the action or claim, the court may award the plaintiff or claimant reasonable expenses, including reasonable attorneys' fees, and shall direct him to account to the corporation for the remainder of the proceeds so received by him. (6) In any action authorized by this section, if the plaintiff holds voting trust certificates or a beneficial interest in shares representing less than five percent of any class of such shares, then unless the shares, voting trust certificates or beneficial interest of such plaintiff has a fair value in excess of one hundred thirty-five thousand dollars, the corporation in whose right such action is brought shall be entitled at any stage of the proceedings before final judgment to require the plaintiff to give security for the reasonable expenses, including attorneys' fees, which may be incurred by it, having jurisdiction of such action, shall determine upon thereafter from time to time, be increased or decreased in the discretion of the court having jurisdiction of such action, upon showing that the security provided has or may become inadequate or excessive.   Previous section... Next section... Return to Legislation Page Return to Main Page