What Is a Proxy Agreement?
A proxy agreement is an agreement that permits an individual to carry out legal tasks for another individual. Proxy agreements are usually seen in stock voting, in which an individual gives another individual permission to vote on their behalf.
When Do You Need a Proxy Agreement?
A proxy agreement is intended to allow a person to act on behalf of another person or business in a legal matter. This kind of agreement is usually used in a corporate stock voting session. The document provides the written authority for the proxy towards serving in the individual’s interests and comprises the terms of the agreement
Purpose of Proxy Agreement
A proxy agreement is an agreement for one individual to represent another individual. The common form of proxy document is one where a shareholder assigns their right towards voting to another individual for votes taken at a corporate shareholder meeting.
Key Terms of Proxy Agreement
The key terms if proxy document comprise;
Proxy voting is normally used during legislative voting. It is only allowed if the legislative body as decided to make use of it during the proceedings.
Regarding corporate law, proxy refers to the authority to make stock votes. It is given in the corporate charter and bylaws of the company. If the authority is not specified in the company charter, a proxy cannot be utilized. The owner of the stock that has his/ her name registered with the company is the only one who could delegate his/ her right to vote.
Unless it is requisite, there is no form that is needed to use to vote as a proxy. Though, there has to be evidence that the proxy is permitted to vote.
A proxy is still valid if there are mistakes or other issues with the document. Generally, anyone who is a stockholder with power at a corporate meeting could delegate that power towards a proxy.
A proxy might vote on normal corporate business matters. The proxy might not vote on major corporate matters, like a merger, without explicit authority.
Anything the proxy does carry out his/her authority is bound by the stockholder as if he/ she acted at the meeting in person.
A proxy might be removed whenever the stockholder finds it fit unless it is being made irrevocable. If the stockholder chooses to sell his or her shares in a corporation, it automatically removes any proxies that were given the right to vote.
Proxies could also be revoked if the stockholder attends the meeting himself. A stockholder in a corporation might act as a proxy for another stockholder but is not a requirement.
Designation of Proxy:
Towards designating a proxy, a shareholder has to appoint a proxy and give complete power of substitution for that individual to vote on his/ her behalf at a shareholder meeting held by the corporation.
Exercise of Voting Rights:
Voting discretion- The proxy is permitted to vote and otherwise act on any other right given towards the stockholder at a meeting. The proxy is given the consent to deal with any action required of the corporation.
Action requiring previous approval- a proxy cannot do a few things without written permission from the shareholder. This comprises making a sale of assets belonging to the corporation, consolidating, reorganizing, or dissolving the corporation.
Inclusions in a Proxy Agreement
Parties involved: In the creation of this agreement, there are usually two parties involved, the first being a person (proxy), and the second is the principal.
Effective dates: This agreement would state the date when the agreement starts and when the agreement will expire, if applicable
How to Draft the Proxy Agreement?
Drafting a proxy document comprises;
The document would state the parties that are part of the agreement, as well as the rights and duties the proxy is able to undertake on behalf of the person. The agreement might comprise certain covenants of the agreement and the terms under which the proxy is appointed.
The proxy agreement would also state a beginning date and end date of the proxy appointment. The person or corporation the proxy is acting on behalf of would specify certain rights and duties of the proxy, and a right to information. Agreements would comprise exemptions and indemnification clauses for protecting the parties. Further information in a proxy agreement may contain liabilities, representations, and warranties.
Types of Proxy Agreement
The different types of proxy forms are
- Short-form proxy form for a general meeting of a private company or unlisted public company
- Long-form proxy form for a general meeting of a private company or unlisted public company
- Proxy form for a general meeting of a listed public company
- Short-form proxy form for an annual general meeting of a private corporation or unlisted public company
- Long-form proxy form for an annual general meeting of a private company or unlisted public company
- Proxy form—AGM—listed public company
What Happens In Case of Violation?
Action upon Approval
When given with a written request and proxy could take certain actions that authorize or approve any action requiring prior approval. The proxy should discuss anything dealing with those actions with the shareholder, or the person won’t have all the necessary information towards ensuring that any action taken would be legal.
Anything that the proxy does regarding the corporation without the written approval of the shareholder is considered void.
Limitations on Liability
If the shareholder has not left any directions for the proxy, he/she has to act for the shareholder as per their own best judgment. The proxy shall not be responsible for any action taken against the shareholder after making his/ her judgment call.
Download a Proxy Agreement Sample Now!
A Proxy form and proxy vote template can be downloaded from below.