What are voting shares

what are voting shares

State Statutory Provisions on Cumulative Voting in Board Elections of For-Profit Corporations

Whether a corporation is required to adopt cumulative voting, and the manner in which a corporation is permitted to adopt cumulative voting, are governed by the laws of the state where the company is legally incorporated. Each state has its own provisions regarding cumulative voting in board elections.

Most states' laws on cumulative voting are one of four types. The most prevalent type only allows cumulative voting if a provision for it exists in the articles of incorporation. The next most popular type requires cumulative voting unless the articles of incorporation expressly prohibit it. A third type, used in a few states, allows cumulative voting to be adopted or prohibited through the company's bylaws. The fourth type, in use in three states, mandates that all companies use cumulative voting for the election of their board of directors.

The remaining states do not fall squarely into one of the above four categories. These states have a hybrid approach that applies different rules depending on the type of corporation electing its board.

Below we have provided summaries of each state's statutory provisions on cumulative voting for corporate board elections.

Caveat: Some jurisdictions have different rules that depend on the date of the company’s incorporation. These provisions are designed to "grandfather in" corporations that originally incorporated under older statutes. For all jurisdictions, this guide deals only with the rules relevant to entities incorporated AFTER the dates targeted by these grandfather provisions.

State Cumulative Voting Provisions

Alabama

Cumulative voting is not the default rule, but the articles of incorporation may allow it. When cumulative voting is permitted, shareholders are subject to notice requirements prior to cumulating votes. See Ala. Code. § 10-2B-7.28 (2004).

Alaska

Cumulative voting is the default rule, but the articles of incorporation may prohibit it. Any amendment to the articles of incorporation that would eliminate cumulative voting can be defeated if the number of shares voting against the proposal is at least equal to the number of shares necessary to elect one board member under cumulative voting. See Alaska Stat. § 10.06.420(d) (2004).

Arizona

Cumulative voting is mandatory. See Ariz. Rev. Stat. § 10-728 (2004).

Arkansas

Cumulative voting is not the default rule, but the articles of incorporation may allow it. When cumulative voting is permitted, shareholders are subject to notice requirements prior to cumulating votes. See Ark. Code. Ann. § 4-27-728 (2003).

California

Cumulative voting is mandatory for all corporations not publicly traded on a major exchange. Other corporations may eliminate cumulative voting by amending its articles of incorporation or through its bylaws. When cumulative voting is permitted, shareholders are subject to notice requirements prior to cumulating votes. See Cal. Corp. Code §§ 301.5, 708(a)-(b) (2004).

Colorado

Cumulative voting is not the default rule, but the articles of incorporation may allow it. When cumulative voting is permitted, shareholders are subject to notice requirements prior to cumulating votes. See Colo. Rev. Stat. §§ 7-102-102(3), 7-107-209 (2003).

Connecticut

Cumulative voting is not the default rule, but the certificate of incorporation may allow it. When cumulative voting is permitted, shareholders are subject to notice requirements prior to cumulating votes. See Conn. Gen. Stat. § 33-712 (2003).

Delaware

Cumulative voting is not the default rule, but the certificate of incorporation may allow it. See Del. Code Ann. tit 6, § 214 (2004).

District of Columbia

Cumulative voting is not the default rule, but the articles of incorporation may allow it. See D.C. Code Ann. § 29-101.27(d) (2004).

Florida

Cumulative voting is not the default rule, but the articles of incorporation may allow it. See Fla. Stat. § 607.0728 (2004).

Georgia

Cumulative voting is not the default rule, but the articles of incorporation may allow it. When cumulative voting is permitted, shareholders are subject to notice requirements prior to cumulating votes. See Ga. Code Ann. § 14-2-728 (2002).

Hawaii

Cumulative voting is mandatory for all corporations not publicly traded. Publicly traded corporations may eliminate cumulative voting by amending their articles of incorporation or through their bylaws. When cumulative voting is permitted, shareholders are subject to notice requirements prior to cumulating votes. See Haw. Rev. Stat. § 414-149 (2003).

Idaho

Cumulative voting is not the default rule, but the articles of incorporation may allow it. See Idaho Code § 30-1-728 (2004). The Idaho Constitution specifically prohibits the legislature from outlawing cumulative voting. See Idaho Const. art. XI, § 4.

Illinois

Cumulative voting is the default rule, but the articles of incorporation may prohibit it. See 805 Ill. Comp. Stat. § 5/7.40 (2004).

Indiana

Cumulative voting is not the default rule, but the articles of incorporation may allow it. When cumulative voting is permitted, shareholders are subject to notice requirements prior to cumulating votes. See Ind. Code. § 23-1-30-9 (2004).

Iowa

Cumulative voting is not the default rule, but the articles of incorporation may allow it. When cumulative voting is permitted, shareholders are subject to notice requirements prior to cumulating votes. See Iowa Code § 490.728 (2003).

Kansas

The current statutory scheme provides that cumulative voting is not the default rule, but the articles of incorporation may allow it. See Kan. Stat. Ann. § 17-6504 (2003).

Effective January 1, 2005, Kansas will have a slightly revised business organization code. Cumulative voting rights will not be substantively affected. See 2004 Kan. L. ch. 143, § 29.

Interestingly, because of the way it was originally passed, the current version of Kan Stat. Ann. § 17-6504 (2003) may violate the Kansas Constitution. See Metro Mobile CTS v. Centel Corp. 694 F. Supp. 806, 807-08 (D. Kan 1988). The new version likely does not violate the constitutional provision implicated in Metro Mobile.

Kentucky

Cumulative voting is not the default rule, but the articles of incorporation may allow it. See Ky. Rev. Stat. Ann. § 271B.7-280 (2004).

Louisiana

Cumulative voting is not the default rule, but the articles of incorporation may allow it. See La. Rev. Stat. § 12:75 (2004).

Maine

Cumulative voting is not the default rule, but the articles of incorporation may allow it. When cumulative voting is permitted, shareholders are subject to notice requirements prior to cumulating votes. See Me. Rev. Stat. Tit. 13-C, § 730 (2003).

Maryland

Cumulative voting is not the default rule, but the articles of incorporation may allow it. See Md. Corp. and Assoc. Code Ann. § 2-104(b)(7) (2003).

Massachusetts

Cumulative voting is not the default rule, but the articles of organization may allow it. See Mass. Gen. Laws ch. 156D, § 7.28 (2004).

Michigan

Cumulative voting is not the default rule, but the articles of incorporation may allow it. See Mich. Comp. Laws § 450.1451 (2004).

Minnesota

Cumulative voting is the default rule, but the articles of incorporation may prohibit it. When cumulative voting is permitted, shareholders are subject to notice requirements prior to cumulating votes. Any amendment to the articles of incorporation that would eliminate cumulative voting can be defeated if the number of shares voting against the proposal is at least equal to the number of shares necessary to elect one board

member under cumulative voting. See Minn. Stat. § 302A.215 (2003).

Mississippi

Cumulative voting is not the default rule, but the articles of incorporation may allow it. Miss. Code Ann. § 79-4-7.28 (2004).

Missouri

Cumulative voting is not the default rule, but either the articles of incorporation or the bylaws may provide for it. When cumulative voting is permitted, shareholders are subject to notice requirements prior to cumulating votes. See Mo. Rev. Stat. § 355.296 (2004). Mo. Const. art. XI, § 6, gives shareholders the right to cumulate their votes unless another election method has been adopted by law. Mo. Rev. Stat. § 355.296 (2004) seems to provide for alternative systems in accord with this constitutional provision.

Montana

Cumulative voting is the default rule, but the articles of incorporation may prohibit it. Any amendment to the articles of incorporation that would eliminate cumulative voting can be defeated if the number of shares voting against the proposal is at least equal to the number of shares necessary to elect one board member under cumulative voting. See Mont. Code. Ann. § 35-1-531 (2003).

Nebraska

Cumulative voting is mandatory. See Neb. Const. art. 12, § 1; Neb. Rev. Stat. § 21-2066 (2003).

Nevada

Cumulative voting is not the default rule, but the articles of incorporation may provide for it. When cumulative voting is permitted, shareholders are subject to notice requirements prior to cumulating votes. See Nev. Rev. Stat. § 78.360 (2004).

New Hampshire

Cumulative voting is not the default rule, but the articles of incorporation may provide for it. When cumulative voting is permitted, shareholders are subject to notice requirements prior to cumulating votes. See N.H. Rev. Stat. Ann. § 293-A:7.28 (2003).

New Jersey

Cumulative voting is not the default rule, but the certificate of incorporation may provide for it. See N.J. Stat. § 14A:5-24 (2004).

New Mexico

Cumulative voting is not the default rule, but the articles of incorporation may provide for it. See N.M. Stat. Ann. § 53-11-33 (2004).

New York

Cumulative voting is not the default rule, but the certificate of incorporation may provide for it. See N.Y. Bus. Corp. § 618 (2004).

North Carolina

Cumulative voting is not the default rule, but the articles of incorporation may provide for it. When cumulative voting is permitted, shareholders are subject to notice requirements prior to cumulating votes. See N.C. Gen. Stat. § 55-7-28 (2004).

North Dakota

Cumulative voting is mandatory. Shareholders are subject to notice requirements prior to cumulating votes. See N.D. Cent. Code § 10-19.1-39 (2003).

Ohio

Cumulative voting is the default rule. Amendments to the articles of incorporation, but not the original articles of incorporation, may eliminate cumulative voting. See Ohio Rev. Code Ann. §§ 1701.04(C). 55. 69(10) (2004).

Oklahoma

Cumulative voting is not the default rule, but the certificate of incorporation may provide for it. See Okla. Stat. tit.18, § 1059 (2004).

Oregon

Cumulative voting is not the default rule, but either the articles of incorporation or the bylaws may provide for it. When cumulative voting is permitted, shareholders are subject to notice requirements prior to cumulating votes. See Or. Rev. Stat. Ann. § 65.247 (2003).

Pennsylvania

Cumulative voting is the default rule, but the articles of incorporation may prohibit it. See Pa. Consol. Stat. Ann. § 1758(c) (2004).

Rhode Island

Cumulative voting is not the default rule, but the articles of incorporation may provide for it. See R.I. Gen. Laws § 7-1.1-31(d) (2004).

Effective July 1, 2005, Rhode Island will have a new business code, but this code does not affect cumulative voting. See Rhode Island Business Corporation Act, 2004 R.I. Pub. Laws ch. 216, § 7-1.2-708(d) (to be codified at R.I. Gen. Laws § 7-1.2-708(d)).

South Carolina

Cumulative voting is the default rule, but the articles of incorporation may prohibit it. When cumulative voting is permitted, shareholders are subject to notice requirements prior to cumulating votes. Any amendment to the articles of incorporation that would eliminate cumulative voting can be defeated if the number of shares voting against the proposal is at least equal to the number of shares necessary to elect one board member under cumulative voting. See S.C. Code Ann. § 33-7-280 (2003).

South Dakota

Cumulative voting is mandatory. See S.D. Const. art. XVII, § 5; S.D. Codified Laws § 47-4-17 (2003).

Tennessee

Cumulative voting is not the default rule, but the charter may provide for it. When cumulative voting is permitted, shareholders are subject to notice requirements prior to cumulating votes. See Tenn. Code Ann. § 48-17-209 (2004).

Texas

Cumulative voting is not the default rule, but the articles of incorporation may provide for it. When cumulative voting is permitted, shareholders are subject to notice requirements prior to cumulating votes. See Tex. Bus. Corp. Act. art. 2.29(d) (2004).

Effective January 1, 2006, Texas will have a new business organization code. This new code will not substantively affect cumulative rights, see Tex. Bus. Org. Code § 21.360-.362 (2004), with the exception of one quirk (possibly unintentional on the legislature’s part) in the grandfather provisions. Under current law, corporations incorporated after September 1, 2003 are presumed to not have cumulative voting unless the articles of incorporation so provide. For corporations incorporated prior to that date, the statutory presumption is reversed. See Tex. Bus. Corp. Act. art. 2.29(d)(2)-(3) (2004). However, under the new code, the normal statutory presumption against cumulative voting, see Tex. Bus. Org. Code § 21.360-.361 (2004) is reversed for corporations incorporated before January 1, 2006. See Tex. Bus. Org. Code § 21.362 (2004). So companies that incorporated between September 1, 2003 and January 1, 2006 will have their statutory presumptions reversed from what it was when they originally incorporated!

Utah

Cumulative voting is not the default rule, but the articles of incorporation may provide for it. See Utah Code Ann. § 16-10a-728 (2004).

Vermont

Cumulative voting is not the default rule, but the articles of incorporation may provide for it. When cumulative voting is permitted, shareholders are subject to notice requirements prior to cumulating votes. See Vt. Stat. Ann. tit. 11A, § 7.28 (2003).

Virginia

Cumulative voting is not the default rule, but the articles of incorporation may provide for it. When cumulative voting is permitted, shareholders are subject to notice requirements prior to cumulating votes. See Va. Code Ann. § 13.1-669 (2004).

Washington

Cumulative voting is the default rule, but the articles of incorporation may prohibit it. See Wash. Rev. Code § 23B.07.280 (2004).

West Virginia

Cumulative voting is mandatory. Shareholders are subject to notice requirements prior to cumulating votes. See W. Va. Const. art. XI, § 4; W. Va. Code § 31D-7-728 (2003).

Wisconsin

Cumulative voting is not the default rule, but the articles of incorporation may provide for it. When cumulative voting is permitted, shareholders are subject to notice requirements prior to cumulating votes. See Wis. Stat. § 180.0728 (2003).

Wyoming

Cumulative voting is not the default rule, but the articles of incorporation may provide for it. When cumulative voting is permitted, shareholders are subject to notice requirements prior to cumulating votes. See Wyo. Stat. Ann. § 17-16-728 (2003).

Source: archive.fairvote.org

Category: Forex

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