Voting rights in S Corporation

Just heard from a friend said that if a share holder holds more than 37% of a corporation, nothing can be passed without your vote. Is that true?

Montebello, CA -

Attorney Answers (3)

Peter Collins Freeman

Peter Collins Freeman

Corporate / Incorporation Lawyer - Laguna Beach, CA

Voting and voting rights can be a tricky issue. Shareholders in small corporations should pay close attention to notices and information received from the corporation, the other shareholders or the directors or officers regarding actions by the corporation or any issues requiring a vote. You should insure that your address and contact information is correct and up to date in the corporation's records for the provision of notice.
As Mr. Doland noted, the requirements for a majority or supermajority vote are typically set out in the bylaws, and you should request a copy of the bylaws from the corporation's secretary. This is true even if there are only two shareholders - while it may seem overly 'formal', even corporations with two shareholders must follow the general rules for all corporations in California, unless they have elected 'close corporation' status which generally permits the corporation to avoid some meeting requirements, etc.
If you believe that there is something afoot by which your rights or interest might be affected, you should: 1) check with the corporation for notices of meetings, etc.; 2) get copies of the corporation's bylaws (and articles); and 3) consult with an attorney regarding any information you receive.

Michael Charles Doland

Michael Charles Doland

Corporate / Incorporation Lawyer - Los Angeles, CA

There is no such rule.

Voting rights are defined int eh Bylaws, and after that the number of shares that actually vote and the majority or supermajority required.

The above is general legal and business analysis. It is not "legal advice" but analysis, and different lawyers may... more
Dana Howard Shultz

Dana Howard Shultz

Corporate / Incorporation Lawyer - Oakland, CA

I agree with my colleagues.

I suspect that your friend is confused concerning cumulative voting, which can help minority shareholders ensure that they are represented on the board of directors.

This information does not constitute legal advice and does not establish an attorney-client relationship.

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