Meetings of holders of securities: Overview, definition, and example
What are meetings of holders of securities?
Meetings of holders of securities are formal gatherings or events where the owners of securities—such as stocks, bonds, or other financial instruments—come together to discuss and vote on matters related to the securities they hold. These meetings are typically convened by the issuer of the securities, such as a corporation or government entity, and are an important part of corporate governance.
Securities holders, often referred to as shareholders (in the case of stocks) or bondholders (in the case of bonds), may be called to vote on a variety of issues, including the approval of major corporate decisions, amendments to the terms of the securities, mergers or acquisitions, changes in corporate governance, and the election of board members. These meetings are held to ensure that the interests of the securities holders are considered in key decisions and that the company operates in a transparent and accountable manner.
Why are meetings of holders of securities important?
Meetings of holders of securities are important because they provide an opportunity for investors to have a say in the management and direction of the company or entity in which they have invested. For shareholders, these meetings allow them to vote on important matters that affect the company’s operations, governance, and financial performance.
For the issuer, holding regular meetings ensures compliance with regulatory requirements, promotes transparency, and fosters trust with investors. It also allows the issuer to solicit feedback from holders of securities, which can be essential for maintaining good relationships with investors and avoiding legal or financial disputes.
Understanding meetings of holders of securities through an example
Imagine a publicly traded company that wants to undergo a major restructuring. The company calls a meeting of its shareholders to vote on the proposal. During the meeting, the board of directors presents the details of the restructuring plan, including how it will impact shareholders and the future direction of the company. Shareholders are then given the opportunity to vote on whether or not to approve the restructuring.
In another example, a corporation issues bonds to raise capital. The bondholders are invited to a meeting to discuss changes to the terms of the bonds, such as an extension of the maturity date or adjustments to the interest rate. The bondholders vote on whether they approve the proposed changes, and if a majority agrees, the terms of the bonds are modified accordingly.
Example of a meetings of holders of securities clause
Here’s what a clause regarding meetings of holders of securities might look like in a bond indenture or shareholder agreement:
“The Issuer agrees to call a meeting of the holders of securities no less than once annually to discuss matters of interest to the holders, including financial performance, governance issues, and potential amendments to the terms of the securities. Notice of the meeting will be sent to all holders at least [X] days in advance, and voting rights will be granted based on the number of securities held by each participant.”
Conclusion
Meetings of holders of securities are a key part of corporate governance, providing a platform for investors to influence important decisions that affect the future of the company or entity. These meetings ensure transparency, facilitate shareholder or bondholder engagement, and help companies comply with legal and regulatory requirements.
For investors, attending these meetings or participating in the voting process is essential to ensure their interests are represented. For issuers, organizing and conducting these meetings is crucial for maintaining trust with investors and ensuring good governance.
This article contains general legal information and does not contain legal advice. Cobrief is not a law firm or a substitute for an attorney or law firm. The law is complex and changes often. For legal advice, please ask a lawyer.