Learn more about what a proxy is for businesses.
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A proxy is someone authorized to act on behalf of someone else. In corporate terminology, a proxy is an agent who attends a corporation’s shareholder meeting and votes for a shareholder who couldn’t attend in person.
Sometimes the word “proxy” is also used as a shortened form of “proxy statement.” This refers to documents sent to shareholders ahead of a shareholder meeting so they can make more informed decisions on the items to be voted on.
When a shareholder can’t be physically present at a shareholder meeting, they can use a legal document to appoint an agent, known as a proxy, to attend the meeting in their place and vote on their behalf. The agent doesn’t need to be another shareholder in the corporation.
If a shareholder can’t attend the meeting in person but doesn’t want to designate a proxy, they usually have the option of voting by mail by filling out a proxy card. In many cases, the shareholders also have the option of voting by phone or internet.
While voting by mail, phone, or internet may be an option, it must be done prior to the shareholder meeting. Consequently, the shareholder will miss out on any information that’s presented during the meeting. The material presented at the meeting could be important to the future of the company and the value of its shares.
Some shareholders who can’t attend the meeting would rather have a trusted agent take in that information and use their own judgment to make decisions on the issues that are up for vote.
If you’re a shareholder and want to appoint a proxy to vote on your behalf, you’ll need to follow the requirements of the U.S. Securities and Exchange Commission (SEC) and your corporation’s Articles of Incorporation and corporate bylaws.
The shareholder and the proxy will need a legal document that gives the proxy the power to cast votes for the shareholder. It’s important to have the document specify to what degree the proxy can act and speak for the shareholder. The proxy must follow any voting instructions given by the shareholder.
The SEC requires corporations to provide a proxy statement to shareholders prior to shareholder meetings. The purpose of the proxy statement is to inform shareholders about the issues that will be voted on at the shareholder meeting.
The proxy statement must include anything that’s up for a vote at the meeting. This can be a variety of things, but some of the most common are board of directors elections, compensation for the directors and executives, proposed mergers and acquisitions, and proposals from the shareholders. The proxy statement is also important because it informs shareholders of the time and place of the annual shareholder meeting and any other upcoming special meetings.
Shareholders aren’t required to vote. But even those who don’t can get valuable information about their investment from the proxy statement.
In corporate terminology, a proxy is an agent who attends a corporation’s shareholder meeting and votes for a shareholder who couldn’t attend in person.
We can help you start your corporation with our corporation formation service. We can also provide a template for your corporate bylaws, which, if you’re a private corporation, you can use to spell out your policies on voting by proxy.
Disclaimer: The content on this page is for informational purposes only, and does not constitute legal, tax, or accounting advice. If you have specific questions about any of these topics, seek the counsel of a licensed professional.