VocabuLaw

Proxy

What is it and what does it mean?

Description of the legal term Proxy:

In the context of British law, the term proxy refers to the authority to act on another person’s behalf, particularly in the voting process at meetings of companies or other organizations. This term is most commonly associated with corporate governance, where shareholders may not be able to attend company meetings in person and therefore opt to appoint someone else to vote on their behalf. Legally, a proxy is a document that authorizes a person, named a proxyholder, to attend, speak, and vote on behalf of the shareholder who has appointed them.

The Companies Act 2006 provides a statutory basis for the use of proxies in company meetings. Shareholders have the right to appoint a proxy under this legislation, giving them a way to exercise their rights and influence the direction of a company without being physically present. This becomes particularly important in matters such as the election of board members, adoption of resolutions, or any decisions that require the vote of shareholders.

Proxies must be appointed in a certain manner as stipulated by a company’s articles of association or the rules set forth in the Companies Act. For a proxy to be valid, it typically needs to be in writing and must abide by any specific requirements set out by the company’s constitution or statutory requirements.

Appointing a proxy does not entirely remove the shareholder’s right to attend the meeting. A shareholder who has appointed a proxy may choose to attend and vote at the meeting themselves, in place of their proxy. However, once the proxy has already voted, the shareholder’s vote may not be counted.

Proxies can be given either general or specific instructions on how to vote. General proxy authority gives the proxyholder discretion to vote as they see fit, while specific proxy authority mandates the proxy to vote according to particular instructions given by the appointer.

Legal context in which the term Proxy may be used:

As an example, consider a scenario where a major multinational corporation, with its headquarters based in the United Kingdom, is having an annual general meeting (AGM) to decide on a potentially transformative merger with another major company. Shareholders from all over the world hold stakes in the corporation and play vital roles in its operation, but not all can attend the AGM due to geographical and logistical reasons.

In this case, those shareholders who cannot attend may choose to appoint a proxy by filling out a proxy form distributed by the company with their voting intentions. This form must be completed and returned within a specific timeframe to be valid. A shareholder in Japan, for instance, may appoint a colleague or the company secretary in the UK as their proxy and give specific instructions on how to vote regarding the merger proposition.

Another instance could be a smaller context, such as a local non-profit organisation in the UK where the board of trustees is meeting to decide on a new policy that would significantly shift the organization’s activities. A key trustee who has a substantial decision-making role is abroad but feels strongly about the policy change. The trustee can appoint a proxy to attend the meeting and vote according to specific instructions they have left, ensuring their voice is heard and they remain an active participant in the organisation’s governance despite their absence.

The legal authority to act as a proxy ensures that the democratic process within corporate and organizational governance in the UK is preserved, enabling shareholders and members to contribute to crucial decisions affecting their interests, regardless of personal circumstances that may prevent physical attendance. It allows for a broader and more inclusive participation in governance processes, capturing the various perspectives of all members entitled to a vote. This legal construct helps sustain the principle that shares confer not just an economic interest, but an entitlement to be involved in a company’s decision-making processes. In this way, the proxy mechanism is an essential tool for representing absentee stakeholders’ interests in British legal and corporate practice.

This website is for informational purposes only and may contain inaccuracies. It should not be used as a substitute for professional legal advice.