Provides that any shareholder who owns 20% or more of a corporation's shares shall be entitled to elect a proportional share of the board of directors.
TITLE OF BILL: An act to amend the business corporation law, in relation to authorizing any shareholder owning twenty percent or more of the issued shares to elect that proportion of the directors which is equal to such shareholder's ownership of corporate shares
PURPOSE OR GENERAL IDEA OF BILL: Provides that any shareholder who owns twenty percent or more of a corporation's shares shall be entitled to elect its leadership.
SUMMARY OF SPECIFIC PROVISIONS: This bill would amend section 618 the business corporation law by adding a new subdivision that would allow a holder of 20% or more of the shares of a corporation to require board of directors to establish cumulative voting for the election of directors of the corporation. The minority shareholder would be required to petition for cumulative voting not less than 90 days before a scheduled election of directors.
JUSTIFICATION: It is the guiding principle of the United States, as per the Bill of Rights, to provide within constitutional limitation, for fair representation in all aspects of human endeavor. Exclusion, isolation, and segregation in all walks of American life have been addressed by all levels of the legislative and judicial systems in a quest to eliminate and abolish the oppression that they manifest in our society.
The concept of American Democracy is based on the rule of the majority and that rule is regulated and tempered by the power of the legislature that has been historically obligated to protect the rights and interests of the minority.
In a corporation, the majority also wins and normally there are no additional structures to protect the minority. For example, if a corporation has two owners and one has 51% of the shares and the other 49% of the remaining outstanding shares, the owner holding 51 % of shares can defeat the other owner in every vote, potentially, without the knowledge of the minority shareholder. It is possible that the minority shareholder would have no representation and no position other than that of passive investor in the corporation and thus be totally at the mercy of the majority shareholder.
Because a corporation does not provide the structures that make protection of minority interests possible, it is important that the NYS Legislature remedy this situation by establishing legal means for the protection for corporate minority interests and to provide
shareholders with a minimum of twenty percent (20%) legal interest the option of cumulative voting that would allow such a shareholder to elect proportionate board membership.
PRIOR LEGISLATIVE HISTORY: 2009-2010: Reported out of Corporations, Authorities & Commissions 2007-2008: Reported out of Corporations, Authorities & Commissions 2005-2006: Corporations, Authorities & Commissions
FISCAL IMPLICATIONS FOR STATE AND LOCAL GOVERNMENTS: None.
EFFECTIVE DATE: This act shall take effect on the first January next succeeding the date on which it shall have become a law, and shall apply to elections of directors occurring on or after such date.
STATE OF NEW YORK ________________________________________________________________________ 1387 2011-2012 Regular Sessions IN SENATE January 7, 2011 ___________Introduced by Sen. PERKINS -- read twice and ordered printed, and when printed to be committed to the Committee on Corporations, Authorities and Commissions AN ACT to amend the business corporation law, in relation to authorizing any shareholder owning twenty percent or more of the issued shares to elect that proportion of the directors which is equal to such share- holder's ownership of corporate shares THE PEOPLE OF THE STATE OF NEW YORK, REPRESENTED IN SENATE AND ASSEM- BLY, DO ENACT AS FOLLOWS: Section 1. Section 618 of the business corporation law is amended to read as follows: S 618. Cumulative voting. (A) The certificate 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 provisions as to cumulative voting, he OR SHE would be entitled to cast for the election of directors with respect to his OR HER shares multiplied by the number of directors to be elected, and that he OR SHE 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 OR SHE may see fit, which right, when exercised, shall be termed cumulative voting. (B) IF ANY SHAREHOLDER WHO OWNS TWENTY PERCENT OR MORE OF THE ISSUED AND OUTSTANDING SHARES OF ANY CORPORATION SHALL PETITION THE BOARD OF DIRECTORS OF SUCH CORPORATION TO CAUSE THE ARTICLES OF INCORPORATION OF SUCH CORPORATION TO BE AMENDED TO PROVIDE FOR CUMULATIVE VOTING AS PROVIDED IN PARAGRAPH (A) OF THIS SECTION, THE BOARD OF DIRECTORS SHALL PROMPTLY CAUSE SUCH ARTICLES OF INCORPORATION TO BE SO AMENDED BEFORE THE NEXT SCHEDULED MEETING OF SHAREHOLDERS FOR THE PURPOSE OF ELECTING DIRECTORS, UNLESS SUCH NEXT MEETING WAS SCHEDULED AND NOTICED TO BE HELD LESS THAN NINETY DAYS FROM THE DATE OF SUCH SHAREHOLDER PETITION. S 2. This act shall take effect on the first of January next succeed- ing the date on which it shall have become a law, and shall apply to elections of directors occurring on or after such date.EXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets [ ] is old law to be omitted. LBD00078-01-1