An SEC registrant recently announced it had delayed its annual meeting from June 12, 2014 to September 11, 2014 because of this lawsuit.
What’s the lawsuit about? Plaintiffs claim the company, a Delaware corporation, did not count abstentions as “no” votes when the most recent increase in the share reserve was put to the shareholders at a special meeting in February 2013, which as an aside nearly tripled the share reserve.
And it makes a difference, because the complaint and SEC filings disclose 77,011,739 shares were voted for the plan amendment, 57,907,345 shares were voted against and there were 36,252,581 abstentions, and no broker non-votes. There were no broker non-votes because it was a special meeting that did not have any routine proposals on the agenda on which brokers could vote.
The complaint alleges the abstention should be counted as a “no” because abstentions result from shares that are entitled to vote, but decided not to, and goes onto to cite three pages of authorities in support of plaintiff’s position.
It doesn’t look like the Company ever filed an S-8 to register the shares, so there is no legal opinion to look at to see if a law firm supported the defendants’ position.
The complaint then goes on to paint a dark picture, alleging that after the defendants realized this defect, they amended their by-laws to support their position.
For the meeting which is delayed, the company has requested another 30 million share increase in the plan reserve. The plaintiff claims the most recent proxy statement is false and misleading because, among other things, it does not disclose the 2013 vote did not properly increase the reserve under the stock plan.