Proxies: Overview, definition, and example
What is a proxy?
A proxy is a person or entity authorized to act on behalf of another party, particularly in situations where the original party is unable to be present or does not wish to take action personally. In the context of corporate governance, a proxy is commonly used when shareholders are unable to attend annual general meetings (AGMs) or other meetings. Shareholders may appoint a proxy to vote on their behalf according to their instructions. Proxies are also used in various other contexts, such as granting permission for someone to represent an individual in legal or financial matters.
Why are proxies important?
Proxies are important because they allow individuals or entities to delegate authority, ensuring decisions can still be made in their absence. In corporate settings, the use of proxies enables shareholders to participate in decision-making even if they cannot attend meetings in person. This mechanism ensures that shareholders retain their voting rights and that the company can proceed with necessary resolutions. Additionally, proxies are important for facilitating smooth operations in situations where physical presence or direct participation is not possible.
Understanding proxies through an example
Imagine a shareholder in a public company who cannot attend the annual meeting due to travel commitments. The shareholder may grant a proxy to a trusted individual, such as a colleague or a professional advisor, to attend the meeting on their behalf and vote on the shareholder's behalf regarding proposed company resolutions. The proxy will vote according to the shareholder’s instructions, ensuring their voice is heard even in their absence.
In another example, a company may appoint a proxy to represent the firm at a governmental hearing regarding a regulatory issue. The proxy, as the company’s representative, can present arguments and make decisions on behalf of the company during the proceedings.
An example of a proxy clause
Here’s how a proxy clause might look in a contract:
“The Shareholder may appoint a proxy to attend and vote at the Annual General Meeting on their behalf. The proxy shall have full authority to vote in accordance with the instructions provided by the Shareholder, and the proxy shall not have the power to act beyond the scope of the Shareholder’s written instructions.”
Conclusion
Proxies play a critical role in ensuring that decisions can be made in the absence of the individual or entity typically responsible for taking action. Whether in corporate governance, legal matters, or other contexts, the ability to appoint a proxy ensures that voting rights and decision-making power are not lost when direct participation is not possible. Clearly defining the terms of proxies in contracts or agreements helps ensure that the delegated authority is properly executed and respected.
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.