AUS
NZ
UK
CA
USA
IND
-Copy_06_02_2025_18_12_25_198643.jpg)
Highlights
- Removing substitution rights limits proxy flexibility.
- Proxy voting may become invalid with personnel changes.
- Shareholder intent could be voided by procedural issues.
When shareholders receive proxy cards, they are often asked to authorize a designated group—referred to as the proxy committee—to vote their shares at a company’s annual or special meeting. These proxy cards frequently contain language granting the proxy committee “full power of substitution,” allowing any member of the committee to delegate their authority to another individual if needed.
This power of substitution ensures that even if the originally named individuals are unable to attend or vote for any reason, alternate authorized persons can still act on behalf of the shareholder. It maintains the integrity of the proxy voting process and allows for necessary adjustments in personnel without invalidating the proxy itself.
However, some shareholders, either out of caution or misunderstanding, may strike out this phrase when filling out the proxy form. By doing so, they are effectively removing the flexibility granted to the proxy committee. This can have significant consequences.
If the original proxy committee members are replaced or otherwise unavailable and the proxy lacks the power of substitution, the proxy becomes void. This means the shareholder’s vote will not be counted, despite their intention to participate. A simple strikeout can unintentionally negate the shareholder’s voice in critical corporate decisions.
Moreover, the absence of substitution rights could complicate the logistics of large-scale voting efforts, particularly in companies with a high volume of shareholders. It can also impose unnecessary legal or administrative hurdles on the company managing the proxy process.
Conclusion
Striking out the “full power of substitution” clause on a proxy card can lead to unintended disenfranchisement. Shareholders should carefully consider the implications before altering standard proxy language, as it may render their proxy invalid in the event of a personnel change in the proxy committee.
