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

BILL NUMBER:S1270

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

2011-2012: Referred to Corporations, Authorities & Commissions 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.