TITLE 14 CORPORATIONS, PARTNERSHIPS, AND ASSOCIATIONS

Section 2. Business Corporations, 14-2-101 through 14-2-1703.

ARTICLE 7 SHAREHOLDERS

14-2-724. Corporation's acceptance of votes.

If the name signed on a vote, consent, waiver, or proxy appointment corresponds to the name of a shareholder, the corporation if acting in good faith is entitled to accept the vote, consent, waiver, or proxy appointment and give it effect as the act of the shareholder.
If the name signed on a vote, consent, waiver, or proxy appointment does not correspond to the name of its shareholder, the corporation if acting in good faith is nevertheless entitled to accept the vote, consent, waiver, or proxy appointment and give it effect as the act of the shareholder if:
1. The shareholder is an entity and the name signed purports to be that of an officer or agent of the entity;
2. The name signed purports to be that of an administrator, executor, guardian, or conservator representing the shareholder and, if the corporation requests, evidence of fiduciary status acceptable to the corporation has been presented with respect to the vote, consent, waiver, or proxy appointment;
3. The name signed purports to be that of a receiver or trustee in bankruptcy of the shareholder and, if the corporation requests, evidence of this status acceptable to the corporation has been presented with respect to the vote, consent, waiver, or proxy appointment;
4. The name signed purports to be that of a pledgee, beneficial owner, or attorney in fact of the shareholder and, if the corporation requests, evidence acceptable to the corporation of the signatory's authority to sign for the shareholder has been presented with respect to the vote, consent, waiver, or proxy appointment; or
5. Two or more persons are the shareholder as cotenants or fiduciaries and the name signed purports to be the name of at least one of the co-owners and the person signing appears to be acting on behalf of all the co-owners.
The corporation is entitled to reject a vote, consent, waiver, or proxy appointment if the secretary or other officer or agent authorized to tabulate votes, acting in good faith, has reasonable basis for doubt about the validity of the signature on it or about the signatory's authority to sign for the shareholder or about the faithfulness or completeness of the reproduction when the original has not been examined.
The corporation and its officer or agent who accept or reject a vote, consent, waiver, or proxy appointment in good faith and in accordance with the standards of this Code section or subsection (b) of Code Section 14-2-722 are not liable in damages to the shareholder for the consequences of the acceptance or rejection.
Corporate action based on the acceptance or rejection of a vote, consent, waiver, or proxy appointment under this Code section or subsection (b) of Code Section 14-2-722 is valid unless a court of competent jurisdiction determines otherwise.

(Code 1981, §14-2-724, enacted by Ga. L. 1988, p. 1070, § 1; Ga. L. 1997, p. 1165, § 8.)

Code Commission notes.

- Pursuant to Code Section 28-9-5, in 1997, "co-owners" was substituted for "coowners" in two places in paragraph (b)(5).

COMMENT

Source: Model Act, § 7.24. This replaces former §§ 14-2-115,14-2-117, &14-2-119.

Corporations are often asked to accept a written instrument as evidence of action by a shareholder. Ordinarily the corporation will have no knowledge of the circumstances surrounding the execution of the instrument. This section establishes general rules permitting the corporation to accept instruments if they appear to be executed in the manner described in the section. This privilege is, of course, qualified by a "good faith" requirement, so that actual knowledge of the circumstances of execution of an instrument cannot be ignored. The rules set forth in this section are not exclusive and may be supplemented by additional rules established by the corporation in its bylaws pursuant to Section 14-2-206(b).

Subsection (a) provides a safe harbor for corporations that accept votes or proxies if they appear to be executed by the shareholder, bearing a name that "corresponds" to the record name of a shareholder, if done in good faith.

Subsection (b) provides a safe harbor for corporations that accept votes bearing signatures in representative capacities. Subsection (b) permits the acceptance of an instrument executed by a person other than the shareholder if there is a designation or evidence of the capacity of the person executing the instrument that indicates the act of the person is the act of the shareholder. It does not affect the rights of grantors and grantees of proxies inter se. Subsections (b)(1)-(3) correspond to former § 14-2-117(e)-(g); and subsection (b)(5) corresponds to § 14-2-117(h). There was no counterpart in former law corresponding to subsection (b)(4), which simply states that if a pledgee has a power of attorney to vote the pledgor's shares, the corporation may accept the votes. This is merely a restatement of agency principles; another statement of those principles appeared in former § 14-2-117(i), which provided that the pledgor may continue to vote pledged shares until they are transferred to the name of the pledgee.

Subsection (c) provides a safe harbor for corporations rejecting votes in good faith. It permits rejection of an instrument if the officer or agent tabulating votes has a "reasonable basis for doubt" about the validity of the signature or about the authority of the person acting on behalf of the shareholder.

Subsection (d) provides protection for officers and directors who accept or reject instruments based on the standards set out in the preceding subsections. This is broader than former law; § 14-2-117(j) only protected corporations that accepted record owners as the owners of shares for all purposes.

Subsection (e) makes clear that the validity or invalidity of corporate action is ultimately a matter for judicial resolution through review of the results of an election in a suit to enjoin or compel corporate action. It is contemplated that any such suit will be brought promptly, typically before the corporate action is consummated or the corporation's position otherwise changes in reliance on the vote, and that any suit that is not brought promptly under the circumstances would normally be barred because of laches.

Note to 1989 Amendment Subsection (c) was amended to delete a reference to "a bylaw authorized by the articles of incorporation" and replace it with a reference to "a bylaw adopted by the shareholders," which is consistent with the reference to Code Section 14-2-1021.

Note to 1997 Amendments Subsection (c) was amended by adding the last clause, permitting corporations to reject proxy votes when concerned about the accuracy of reproductions. Subsections (d) and (e) were amended by the addition or a reference to proxies appointed in accordance with the standards of Code section 14-2-722(b), which authorizes facsimile transmission of proxies.

Cross-References Consents, see § 14-2-704. "Entity" defined, see § 14-2-140. Officers, see § 14-2-840. Proxies, see § 14-2-722. "Secretary" defined, see § 14-2-140. "Shareholder" defined, see § 14-2-140. Voting by nominees, see § 14-2-723. Waiver of notice, see § 14-2-706.

RESEARCH REFERENCES

Am. Jur. 2d.

- 18A Am. Jur. 2d, Corporations, § 823 et seq.

C.J.S.

- 18 C.J.S., Corporations, § 447 et seq.

ALR.

- Corporations: right to reconsider vote in stockholders' or directors' meeting, 13 A.L.R. 131.

Waiver of right to object to voting of invalid or unauthorized stock, 72 A.L.R. 948.

Powers of voting trustees, 159 A.L.R. 1067.

Corporations: casting of ballots after closing of polls, 41 A.L.R.3d 234.

Corporations: power of inspectors of election relating to irregular or conflicting proxies, 44 A.L.R.3d 1443.

Right, as between pledgor and pledgee, to vote pledged stock, 68 A.L.R.3d 680.

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