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LEGAL DICTIONARY

Proxy Agreement

What Is a Proxy Agreement?

A proxy agreement, also known as a proxy contract, is a contract that allows one party to conduct legal tasks on behalf of another party.

For example, a stockholder may permit another person to vote for them at a stockholder's meeting that they cannot attend. The two parties would sign a proxy agreement that provides legal documentation that one party authorizes their voting rights to another party for a specified time.

What Does a Proxy Agreement Include?

A proxy agreement typically includes the following sections:

  • Names of both parties
  • The length of the term of the proxy agreement
  • How voting rights will be exercised
  • Remuneration (if any) for the proxy
  • Representations and Warranties for the proxy
  • Liability for a breach of contract
  • Applicable laws
  • How any disputes will be settled
  • Protocols for extending, terminating, or modifying the proxy agreement
  • Miscellaneous details pertinent to this situation

Unless otherwise stated in the agreement, a proxy has no more voting power or authority after a vote is over.

It is also important to remember that state laws regarding proxies can overrule a corporation's bylaws. For example, if a state law allows members of all corporations to choose proxies at all business meetings, the corporation's bylaws cannot ban proxy voting.

How to Designate a Proxy

Publicly traded companies hold annual meetings to report activities to shareholders. Before these meetings, the companies send shareholders information on what topics will be discussed and voted on at the meeting. Topics might include ownership of shares, changes in the structure of the board of directors, or executive benefits.

Rather than physically attending the meeting, a shareholder may appoint someone they trust to act as their proxy by voting on their behalf. This person will vote in line with the shareholder's written directions. Proxies can vote on an official ballot or when votes are taken by a show of hands.

The stock owner whose name is registered with the corporation is the only one who can delegate their right to vote to another party. Also, if a stockholder wants to avoid voting on a particular issue, they can choose not to attend the meeting and not designate a proxy to avoid casting a vote.

What Is a Proxy Board?

For national security reasons, the U.S. Department of Defense requires that a proxy board comprised of American citizens oversee foreign entities' acquisition of certain American companies. The requirement applies primarily to defense contractors involved in classified contracts.

The proxy board members are responsible for the day-to-day business activities.

Under a Special Security Agreement (SSA), a variation of a proxy board, the board of directors can be comprised of both American citizens and citizens of the parent company's country. However, when issues related to national security come up, only the American managers may participate in the discussion.

The idea behind the SSA is to allow foreign companies to operate profitably in the U.S. but with national security guidelines in place.

Helpful Resources:

SEC - Proxy Agreement

SEC - Annual Meetings and Proxy Requirements.

What Is a Proxy Agreement?

A proxy agreement, also known as a proxy contract, is a contract that allows one party to conduct legal tasks on behalf of another party.

For example, a stockholder may permit another person to vote for them at a stockholder's meeting that they cannot attend. The two parties would sign a proxy agreement that provides legal documentation that one party authorizes their voting rights to another party for a specified time.

What Does a Proxy Agreement Include?

A proxy agreement typically includes the following sections:

  • Names of both parties
  • The length of the term of the proxy agreement
  • How voting rights will be exercised
  • Remuneration (if any) for the proxy
  • Representations and Warranties for the proxy
  • Liability for a breach of contract
  • Applicable laws
  • How any disputes will be settled
  • Protocols for extending, terminating, or modifying the proxy agreement
  • Miscellaneous details pertinent to this situation

Unless otherwise stated in the agreement, a proxy has no more voting power or authority after a vote is over.

It is also important to remember that state laws regarding proxies can overrule a corporation's bylaws. For example, if a state law allows members of all corporations to choose proxies at all business meetings, the corporation's bylaws cannot ban proxy voting.

How to Designate a Proxy

Publicly traded companies hold annual meetings to report activities to shareholders. Before these meetings, the companies send shareholders information on what topics will be discussed and voted on at the meeting. Topics might include ownership of shares, changes in the structure of the board of directors, or executive benefits.

Rather than physically attending the meeting, a shareholder may appoint someone they trust to act as their proxy by voting on their behalf. This person will vote in line with the shareholder's written directions. Proxies can vote on an official ballot or when votes are taken by a show of hands.

The stock owner whose name is registered with the corporation is the only one who can delegate their right to vote to another party. Also, if a stockholder wants to avoid voting on a particular issue, they can choose not to attend the meeting and not designate a proxy to avoid casting a vote.

What Is a Proxy Board?

For national security reasons, the U.S. Department of Defense requires that a proxy board comprised of American citizens oversee foreign entities' acquisition of certain American companies. The requirement applies primarily to defense contractors involved in classified contracts.

The proxy board members are responsible for the day-to-day business activities.

Under a Special Security Agreement (SSA), a variation of a proxy board, the board of directors can be comprised of both American citizens and citizens of the parent company's country. However, when issues related to national security come up, only the American managers may participate in the discussion.

The idea behind the SSA is to allow foreign companies to operate profitably in the U.S. but with national security guidelines in place.

Helpful Resources:

SEC - Proxy Agreement

SEC - Annual Meetings and Proxy Requirements.