Shareholder direct amendment of bylaws in Maryland

JurisdictionSouth Africa
Citation(2017) 3(2) JCCL&P 79
Pages79-81
AuthorJames J Hanks Jr.
Published date16 August 2019
Date16 August 2019
79
SHAREHOLDER DIRECT
AMENDMENT OF BYLAWS IN
MARYLAND
JAMES J HANKS JR
Partner: Venable LLP, USA
JEFFREY M KEEHN
Partner: Venable LLP, USA
MICHAEL F SHEEHAN
Associate: Venable LLP, USA
I INTRODUCTION
As preparation for the 2018 proxy season begins, Maryland public
companies are continuing to consider whether, and to what extent,
to extend to shareholders the power to directly amend any provision
of the bylaws without board action. Under the new proxy–voting
policy of Institutional Shareholder Services Inc (‘ISS’), as adopted
and applied for last proxy season and continued for 2018, ISS will
withhold recommending the election of members of the nominating–
and–governance committee of a company’s board that does not grant
this direct–amendment power to holders of at least US$2 000 worth
of the company’s shares for at least one year by a vote of no more
than a majority of the possible votes on the matter. Thus, three main
variables are implicated: (a) The percentage and length of ownership
of shares by the proponent/s of the direct amendment; (b) the range
of bylaw provisions that may be directly amended; and (c) the
shareholder vote necessary to approve the direct bylaw amendment.
Share Ownership of Proponents
There is growing recognition by companies and major holders that
the US$2 000/one–year requirement of SEC Proxy Rule 14a-8 —
originally adopted on 21 May 1998, when the Dow Jones Industrial
Average was under 9 000 — for shareholder precatory proposals, is
no longer sufficient in 2018, and certainly not for binding proposals
to directly amend bylaws without prior board approval. Moreover,
the now overwhelming market standard for shareholder ownership
to begin a proxy–access process — 3 per cent for 3 years — is a clear
(2017) 3(2) JCCL&P 79
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