Irrevocable Proxy
An Irrevocable Proxy is a proxy that cannot be revoked during its valid term when the governing law’s requirements for irrevocability are satisfied, allowing the proxy holder to exercise specified voting authority for the stockholder.
How it works
Under Delaware General Corporation Law Section 212(e), a duly executed proxy is irrevocable if it states that it is irrevocable and is coupled with an interest sufficient in law to support an irrevocable power, and it remains irrevocable only while that supporting interest exists. The proxy can be coupled with an interest in the stock or in the corporation generally. Transaction documents sometimes use an Irrevocable Proxy to reinforce a Voting Agreement or other negotiated voting commitment.
A proxy delegates voting authority
The stockholder authorizes another person to act with respect to voting or written-consent rights within the proxy’s defined scope.
Irrevocability has legal requirements
Delaware Section 212(e) requires a duly executed proxy that states it is irrevocable and is coupled with a sufficient interest.
The supporting interest must continue
The statute makes irrevocability last only as long as the interest supporting the irrevocable power remains sufficient.
The scope can be narrow
A proxy can cover only transaction-specific matters rather than all stockholder voting decisions.
Worked example: enforcement mechanism
A holder contractually agrees to vote for a merger but does not submit its vote. A valid transaction-specific Irrevocable Proxy can permit the proxy holder to cast the covered vote as authorized.
Why it differs from a Voting Agreement
The Voting Agreement creates the holder’s contractual obligation; the proxy can separately delegate the power to cast the vote.
Common mistakes
Assuming any signed proxy is irrevocable; ignoring the coupled-interest requirement; treating the proxy as unlimited authority; and confusing delegated voting power with ownership of the shares.
Example
A stockholder signs a Voting Agreement supporting a merger and grants the buyer an Irrevocable Proxy to vote the covered shares on specified transaction matters if the stockholder fails to do so, subject to the proxy’s stated conditions and applicable law.
Example
A stockholder signs a Voting Agreement supporting a merger and grants the buyer an Irrevocable Proxy to vote the covered shares on specified transaction matters if the stockholder fails to do so, subject to the proxy’s stated conditions and applicable law.
Professional note
Calling a proxy “irrevocable” does not make it irrevocable by label alone. Delaware law requires both the express statement and a legally sufficient coupled interest.
Related terms
- Voting Rights
Voting rights are shareholder rights to vote on specified corporate matters, commonly including director elections and other proposals.
- Beneficial Holder
A Beneficial Holder is the investor with the economic interest in a security or claim that is registered or held through a broker, bank, custodian, nominee or securities depository rather than directly in the investor’s own name.
- Stockholders Agreement
A Stockholders Agreement is a contract among stockholders, or among stockholders and the company, that governs specified ownership, voting, governance, transfer, consent or exit rights relating to the company’s shares.
- Voting Agreement
A Voting Agreement is a contract under which one or more stockholders agree how they will vote, consent or otherwise exercise specified voting power on identified matters during the agreement’s term.
Related ROIStreet guides
- What Is the Rule of 55?
The Rule of 55 is an informal name for a federal exception to the 10% additional tax on certain early retirement-plan distributions. It can apply when a worker separates from the employer maintaining a qualified plan in or after the calendar year the worker reaches age 55. This guide explains the age test, eligible plans, IRA differences, taxes, rollovers and special public-safety rules.
- Stocks vs. Bonds: A Practical Comparison
Stocks represent ownership in companies; bonds generally represent lending to an issuer. This comparison explains how the two differ in return sources, volatility, income, maturity, priority, credit risk and liquidity.
- What Is a 401(k) Recordkeeper?
A 401(k) recordkeeper maintains the participant-level ledger: contributions, investments, gains and losses, fees, loans, distributions and account balances. The recordkeeping role is distinct from holding plan assets, writing the plan document or serving as the legal plan administrator, even when one financial company bundles several of those services.
- What Compensation Counts for a 401(k)?
There is no single universal 401(k) compensation number. A plan can use different definitions for deferrals, matching, profit sharing and testing, while statutory definitions govern limits such as Sections 401(a)(17), 414(s) and 415.