Proxy Voting
/ˈprɒksi ˈvəʊtɪŋ/
Proxy voting allows shareholders to vote in company meetings without attending, typically by appointing someone else to vote on their behalf for specific resolutions.
Proxy voting allows shareholders to vote in company meetings without attending, typically by appointing someone else to vote on their behalf for specific resolutions.
Proxy voting is a mechanism that enables shareholders who cannot attend a company's general meetings to delegate their voting rights to another person, allowing them to participate in corporate decisions remotely while ensuring their interests are represented in important matters like electing directors or approving major company changes.
Proxy voting allows shareholders to participate in corporate decision-making without physically attending the company's general meetings. When you appoint a proxy, you authorise another person—typically the chairperson of the meeting, another director, or a fellow shareholder—to cast votes on your behalf according to your instructions.
This mechanism is particularly important for companies with geographically dispersed shareholders or those who are too busy to attend meetings in person. By using proxy voting, shareholders can ensure their voice is heard on critical matters such as approving the financial statements, electing directors, authorising share issuances, or making significant changes to the company's constitution.
In Ireland, proxy voting is a statutory right for shareholders under the Companies Act 2014. Companies must provide proxy forms with their meeting notices, and shareholders can typically submit their votes electronically or by post before the meeting takes place. This ensures that all shareholders, regardless of their location or availability, can exercise their voting rights effectively.
When a company calls a general meeting, they must send a notice to all shareholders along with a proxy form. This form allows you to appoint someone to vote on your behalf and includes details about the resolutions being voted on. You can instruct your proxy how to vote on each resolution or give them discretion to vote as they see fit.
Most companies provide two main options on the proxy form: you can vote "For" or "Against" each resolution, or you can appoint the chairperson of the meeting as your proxy with discretion. The chairperson option is common for shareholders who trust the board's recommendations but still want to be counted in the quorum.
Once you complete the proxy form, you return it to the company before the deadline specified in the notice. The company then records your vote, and your proxy will cast it at the meeting. Proxy votes are counted alongside votes cast by shareholders attending in person, determining whether resolutions pass or fail.
There are two main types of proxy voting: general proxies and specific proxies. A general proxy gives your appointed representative discretion to vote as they think best on all matters at the meeting. This is often used when shareholders trust the proxy's judgement or lack strong views on the resolutions.
A specific proxy, also called a directed proxy, requires your representative to vote exactly as you have instructed on each resolution. This gives you complete control over how your shares are voted but requires you to research and decide on each item beforehand. Most proxy forms allow you to choose between these two approaches for each resolution separately.
Proxy voting is fundamental to good corporate governance because it ensures shareholder democracy extends beyond those physically present at meetings. Without proxy voting, only shareholders who can attend in person would have influence, potentially allowing a small group to dominate decisions affecting all shareholders.
For companies with institutional investors like pension funds or mutual funds, proxy voting is how these large shareholders exercise their stewardship responsibilities. They carefully review meeting agendas and use their proxy votes to hold management accountable, influence executive pay policies, and vote on environmental and social issues.
For smaller shareholders and founders with management equity, proxy voting ensures your ownership stake translates into actual influence, even if you cannot attend every meeting. This is particularly important during up round fundraising events or when considering changes to share option schemes that might affect employee incentives.
You can appoint almost any individual as your proxy, though there are some practical considerations. Most shareholders appoint the chairperson of the meeting, as they will be present and familiar with the proceedings. Alternatively, you could appoint another director, a fellow shareholder, or even your solicitor or accountant.
If you appoint someone other than the chairperson, they must attend the meeting to exercise your vote. If they do not attend, your vote will not be counted. This is why appointing the chairperson is often the safest option, as they are guaranteed to be present.
It is worth noting that you cannot appoint a corporation as your proxy—it must be a natural person. Also, if you hold shares jointly with others, all joint holders must sign the proxy form unless one has been authorised to sign on behalf of all.
If you do not submit a proxy vote and do not attend the meeting, your shares will not be counted toward the quorum or the voting results. This means your views will not influence the outcome, and you effectively forfeit your right to participate in that particular decision.
For important matters requiring a special resolution (75% majority), failing to vote could mean that a minority of shareholders make decisions affecting your investment. For routine matters, the board's recommendations typically pass with little opposition, but for contentious issues, every vote matters.
Yes, you can change your proxy instructions at any time before the voting deadline by submitting a new proxy form. The most recent valid proxy form received by the company will replace any earlier submissions. This allows you to adjust your voting decisions if new information emerges or circumstances change.
If you attend the meeting in person after submitting a proxy form, your physical presence automatically cancels your proxy appointment. You can then vote directly on resolutions at the meeting, overriding any instructions you previously gave to your proxy. This ensures shareholders who make the effort to attend have the final say on how their shares are voted.
Proxy votes are counted alongside votes cast by shareholders attending the meeting. For each resolution, the company secretary or an appointed scrutineer will tally all votes—both those cast in person and those submitted by proxy. The results are announced at the meeting and recorded in the minutes.
In Irish companies, most ordinary resolutions require a simple majority (more than 50% of votes cast) to pass. Special resolutions, such as changing the company's constitution or approving a significant transaction, require a 75% majority. Proxy votes are crucial for reaching these thresholds, especially for companies with many absentee shareholders.
The Companies Act 2014 requires companies to specify a deadline for receiving proxy forms in the meeting notice. Typically, this deadline is 48 hours before the meeting, but it can be longer. Electronic proxy submissions are becoming increasingly common, with some companies accepting them up to the start of the meeting.
Missing the deadline means your proxy vote will not be counted, so it is essential to submit your form well in advance. If you are using postal methods, consider potential delays and submit several days before the deadline to ensure timely receipt.
Yes, institutional investors like pension funds, insurance companies, and mutual funds are significant users of proxy voting. They often hold shares in hundreds of companies and cannot attend every meeting. Instead, they employ proxy voting advisors who research issues and recommend how to vote on matters like executive compensation, director elections, and environmental policies.
These institutional votes can swing the outcome of contentious resolutions, making proxy voting a powerful tool for shareholder activism. For founders, understanding how institutional investors use proxy voting is important when seeking equity financing from venture capital firms or other institutional backers.
Disputes about proxy votes are relatively rare but can occur if there are questions about the validity of proxy forms or allegations of misconduct. The chairperson of the meeting has the authority to decide on the validity of proxy votes, though their decisions can be challenged by shareholders present at the meeting.
In serious cases, disputes may need to be resolved through the courts. To avoid disputes, companies should ensure their proxy voting procedures are clear, transparent, and strictly followed. Proper record-keeping of all proxy forms received is essential for demonstrating compliance with governance standards.
