A legal overview of some shareholder voting rules, with regards to New York business corporations.

Jul 14, 2021

Law Offices of John Kiritsis, Esq. Phone: 212-922-0005

By: John Kiritsis, Esq., CPA, MBA, MS, JD, LL.M

 

Before beginning our exploratory legal guide with regards to this topical area of the law, it is worth remembering that the BCL (New York Business Corporation Law) is legal body of rules and regulations, as it concerns corporate governance of most business purpose corporations in New York.  It is very important to keep in mind, that this is a complicated area of the law (even among many legally trained professionals, such as judges and lawyers), which is going through constant changes all the time.

 

Under Section 612 of the BCL, every shareholder is entitled to one vote for every share standing in his or her name on the record of shareholders, unless otherwise provided in the certificate of incorporation. In other words, the default position is one share one vote.

 

Any corporate action, other than the election of directors (see the applicable BCL statutory provisions) taken by a vote of the shareholders, would generally require a majority of the votes cast at a meeting of shareholders by the holders of shares entitled to vote thereon, unless otherwise provided by statute, the certificate of incorporation or a by-law adopted by the shareholders (See Section 614 of the BCL). Some statutory exceptions may include: Approval of an amendment to the certificate of incorporation as per Section 803 of the BCL, and authorization of a shareholders’ petition for judicial dissolution as per Section 1103 of the BCL, require the vote of a majority of all outstanding shares entitled to vote thereon. Under Section 903 of the BCL, an approval of a merger or consolidation, approval of any sale, lease, exchange or other disposition of all or substantially all of the assets of the corporation, if not made in the usual or regular course of the business actually conducted by the corporation ( as per Section 909 of the BCL), and authorization of a non-judicial dissolution (as per Section 1101 of the BCL) require: For corporations incorporated after February 22, 1998, or whose certificates of incorporation expressly so provide, a majority of the votes of all outstanding shares entitled to vote thereon.  For other corporations in existence on February 22, 1998, two-thirds of the votes of all outstanding shares entitled to vote thereon.

Under Section 617 of the BCL, except as otherwise provided in the certificate of incorporation or a by-law adopted by the shareholders, an abstention shall not constitute a vote cast.

 

Unlike Delaware law, which seems to be protective of the members of the Board of Directors – New York tends to have a relatively more paternalist/protective approach, as it concerns with the corporate shareholders.

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