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What Is a Proxy Letter?
Being in two places at once seems impossible, but it isn’t. You can still attend your best friend’s wedding while voting for your corporation’s next generation of corporate officers. All you need is a written agreement authorizing another person, your secretary or any person you trust, to attend the board meeting and vote in your place. All you need to do is write a proxy letter. A proxy letter is a formal business document commonly used by members of a corporation, organization, or institution. The letter provides an arrangement where you legally authorize someone to take your place in a shareholder’s meeting. The letter grants him the same rights as you would exercise during the gathering; these rights include the right to vote and contribute ideas.
Different Types of Proxies
When creating a proxy letter, you should set the parameters of a proxy’s authority. What actions will he be doing on your behalf? And how will he execute them? You can choose to give him unlimited or specific powers. Highly similar to a power of attorney, proxies can be categorized into two:
To simply explain: what you can do in the meeting, a proxy can do as well. When you execute a general proxy arrangement, you are allowing your proxy to vote on any matter discussed during the board meeting. Some associations highly discourage or ultimately ban the use of general proxies, since their by-laws expressly provide that certain issues may only be resolved through the votes of actual members.
Also called limited proxy. The proxy can only do those specific acts written in the proxy letter. In this arrangement, you will have to include a list of specific issues or matters your proxy can vote for during the meeting. For example, the letter only authorizes the proxy to vote against membership increase. He may not vote on other matters aside from that.
A direct proxy utilizes communication devices such as telephone or email. You will directly talk to the proxy while giving ‘real-time’ instructions on how to vote. The proxy merely serves to communicate your decisions in the board meeting. You will get updates and the proxy will have fast responses. Unlike the other types of proxies, despite being absent in the meeting, you are still able to fully participate.
Unlike the others, this type of proxy bears no authority or power. He is appointed and encouraged to join the board meeting for purposes of attendance. When a quorum is not reached during meetings, they are usually adjourned and set for another day. A quorum proxy is hired to avoid this inconvenience.
Cardinal Rules When Issuing Proxy Letters
A proxy letter contains a binding agreement. Since it is an agreement, it must observe formalities to be binding and enforceable. It is a basic rule that the document must be in writing, it must contain the date, and the owner must sign it. The letter should contain the duration the proxy will last and its purpose. In the event, the owner or shareholder issues multiple proxies, the letter which was issued last will be the only one valid. In turn, the formerly issued proxies are implicitly canceled.
A change in mind and heart is not unusual; it’s human nature. You can cancel a proxy arrangement and issue a new one. No law prohibits you from doing so. There are several ways to revoke a proxy. One way is by notifying the corporation or association’s secretary. You can email your intention of canceling the proxy a day before the meeting and issue a new one reflecting your revised preference. Another way of revoking a proxy arrangement is by attending the meeting and voting yourself. This is an implied way of canceling the proxy. However, it is important that you will be the one to cast the vote, not the proxy otherwise the proxy is not revoked and the vote cast by him is valid. Lastly, a formerly issued proxy can be superseded by a newly issued proxy letter. If previously you have appointed Mr. A as your proxy but later on issued another letter appointing Mr. B as the new proxy, the former proxy is deemed canceled. Hence, it is essential to include a date in your letter to determine which one is the most recent.
How to Write a Proxy Letter for a Board Meeting
Writing a proxy letter is easy. It is similar to every other business letter you have written. A simple proxy letter should only use a single page. Typically, a letter has a heading, date, address, salutations, body, and signature. A proxy letter has the same. The only difference is, a proxy contains an agreement that has legal repercussions on the owner. To guide you in writing one, take note of the steps provided below.
Step 1: Read the guidelines under the corporation’s by-laws
The first thing you should do is read your corporation’s by-laws and find out if proxy voting is allowed. Also, try and check for additional guidelines on how to draft the proxy letter. Some organizations have specific requirements such as the use of certain phrases or sections. Others make use of a proxy form that a member can fill out and send to the organization a few days before the commencement of the meeting. If the by-laws do not contain any mention of voting by proxy, confirm with the organization’s head or officers.
Step 2: Write the date
A proxy letter is a formal document. Writing the date in the letter is critically important, this will help us verify the document or agreement should the need arise. It is standard practice when writing business letters to format the date by day/month/year. For example, “29 May 2020.” The date should be the day the letter should be sent or emailed.
Step 3: Indicate your name, address, and title
To serve as introductions, the first paragraph in a proxy letter should introduce your name, address, and your title in the company. Consider this example, “I, John Doe, of 123 Robertson Street and a member of ABC corporation owning 10, 000 shares of stock of said corporation…”
Step 4: Indicate the name of the proxy
The proxy is the person that will represent you and vote on your behalf in the meeting. Adding to the example above, consider writing “I, John Doe, of 123 Robertson Street and a member of ABC corporation owning 10, 000 shares of stock of said corporation officially appoint Mary Grace as my proxy.”
Step 5: State the purpose of the proxy
If the purpose of the arrangement is to have the proxy vote for you in a board meeting, specify the purpose of the meeting and its date. I suggest you write it like this, “I authorize my proxy to vote on my behalf at the board meeting for the election of new officers to be held on June 22, 2020.”
Step 6: Sign the proxy letter
Finally, write your full name at the bottom of the letter and include your signature above it. Signing a document signifies that you fully understand and agree to its content. Once you sign the letter, it becomes binding and legally enforceable unless you cancel or revoke the authority.
How do I vote by proxy?
A few months or days before the voting period, the corporation will send you a letter or email containing the specifics. The letter will contain the issues you will be voting on during the meeting and a notice allowing voting by proxy. If it does not contain such notice, you may re-read your organization’s by-laws. It normally provides the guidelines for voting by proxy. Typically, to enable a person to vote by proxy, he or she needs to issue a proxy letter authorizing another person to vote on his behalf in the meeting.
Who can be appointed as a proxy?
A proxy can be any person. It is not limited to the shareholders or members of the corporation. However, since a proxy is fundamentally an agent, it should be a person you can trust. On legal technicalities, the law requires that a proxy should be of legal age and capable of entering into contracts.
What are the rights of a proxy?
The proxy has the same rights and obligations as the members or shareholders attending the meeting. He has the right to vote, right to abstain from voting, right to object, and the right to voice out his opinions.
What makes a proxy legal?
There is no law in the US which prohibits the use of proxies when voting in board meetings or election. Generally, voting by proxy is allowed but its usage may be restricted by a corporation’s by-laws.
Are proxy votes confidential?
Yes. Typically, they are confidential. The voting process in a corporate meeting is made through a ballot. The vote made by a stockholder or his proxy is made confidential through this system of voting. Once all votes are cast, they are tabulated and announced. There is no way of knowing who voted for who, unless they announce it personally.
When it comes to decision-making in a corporation, association, or institution, attending the gathering in person is ideal. But if the circumstances do not permit, proxy letters are a great tool you can use. You will still be able to participate in the voting process despite not being physically present. But make sure you follow the guidelines in your association booklet for your proxy arrangement to be valid. If your bylaws do not require any form for the letter, you can check our numerous sample templates and find one you can work with. All you need in the general structure, fill out a few blanks and you are good to go.