Opinion ID: 1662024
Heading Depth: 1
Heading Rank: 2

Heading: quorum and voting of stock

Text: Section 1. The holders of 70 percent of the shares of stock issued and outstanding and entitled to vote, represented in person or by proxy, shall constitute a quorum at all meetings of the shareholders for the transaction of business.    Section 2. If a quorum is present, the affirmative vote of 70 percent of the shares of stock represented at the meetings shall be the act of the shareholders unless the vote of a greater number of shares is required by law.          (e) Any amendment, alteration, modification or repeal of any provision of the Articles of Incorporation or By-laws of this Corporation must be approved by the affirmative vote of 70 percent of all the shareholders of the corporation.       ARTICLE VI MEETINGS OF THE BOARD OF DIRECTORS       Section 6. 70 percent of the directors shall constitute a quorum for the transaction of business unless the vote of a greater number of directors is required by law. The act of 70 percent of the directors present at any meeting at which a quorum is present shall be the act of the Board of Directors, unless the act of a greater number is required by statute. If a quorum shall not be present at any meeting of directors, the directors present thereat may adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present.       ARTICLE IX OFFICERS       THE PRESIDENT Section 6. The President shall be the chief executive officer of the corporation, shall preside at all meetings of the shareholders and the Board of Directors, shall have general and active management of the business of the corporation and shall see that all resolutions of the Board of Directors made in accordance with these By-Laws are given due consideration. Section 7. He shall execute bonds, notes, mortgages and other contracts requiring a seal, under the seal of the corporation, except where required or permitted by law to be otherwise signed and executed and except where the signing and execution thereof shall be expressly delegated by the Board of Directors by their affirmative vote of 70 percent to some other officer or agent of the corporation.       ARTICLE XII AMENDMENTS Section 1. These By-Laws may be altered, amended or repealed or new By-Laws adopted at any regular or special meeting of the shareholders at which a 70 percent quorum is present or represented, by the affirmative vote of 70 percent of all the stock of this corporation entitled to vote, provided notice of the proposed alteration, amendment or repeal be contained in the notice of such meeting. During the same shareholder meeting in which these bylaws were adopted, Roach elected himself and James Forstman to serve as Legal's directors. Upon conclusion of the shareholder meeting, a meeting of the board of directors was held during which Roach was elected to serve as President/Treasurer and Forstman was elected to serve as Vice President/Secretary. By resolution of the directors, the ownership of the corporation was then realigned so that Roach and Forstman each owned 500 shares of Legal's stock. Roach was also authorized and empowered to procure, at the expense of the corporation, all necessary services, insurance, commitments for loans and any and all other things necessary and incident to the construction of an office building to be located in Homewood, Alabama. Roach and Forstman then executed a shareholder agreement which obligated each of them to (1) vote for each other as Legal's directors; (2) vote for Roach as President/Treasurer and Forstman as Vice President/Secretary; (3) require the other shareholders or directors to either rescind their vote or cause the corporation to purchase the dissenting shareholder's stock in the event action was taken or authorized by a vote of less than fifty-one percent of the shareholders or directors; (4) provide one-half of the funds necessary to meet all mortgage payments, tax payments, maintenance costs, insurance, and any and all expenses necessary and incidental to the construction, ownership, operation and maintenance of an office building; (5) sell his shares to Legal in the event that the shareholder failed or refused to pay one-half of the expenses; (6) offer his shares to Legal at an agreed upon price before offering to transfer his shares to any person other than the present stockholders; and (7) submit to arbitration any disagreement which might arise from the terms of the shareholder agreement. Both Roach and Forstman contributed $14,000.00 towards the construction costs of a building in which they intended to maintain their separate law offices. After a site was purchased and bids from local contractors were submitted, it became apparent to the parties that the cost of constructing the building as planned exceeded the funds available. In an effort to reduce those costs, Roach offered to, and did, act as the general contractor for the project. Prior to the completion of the building, a special shareholder meeting was held on September 24, 1975, during which Frank K. Bynum, another practicing attorney, was elected to serve as Legal's third director. The directors then issued Bynum 500 shares of Legal stock and elected him to the position of Secretary. The issuance of stock to Bynum brought the total number of issued and outstanding Legal shares to 1500, with each of the stockholders owning one-third. Bynum contributed $14,000.00 toward the building fund and executed a shareholder agreement similar to that signed by Roach and Forstman except this agreement, signed by all three men, bound them to (1) vote for each other as directors; (2) vote for Roach as President/Treasurer, Forstman as Vice President, and Bynum as Secretary; (3) required the other shareholders or directors to either rescind their vote or cause the corporation to purchase the dissenting shareholder's stock in the event action was taken or authorized by a vote of less than seventy percent of the shareholders or directors; and (4) provide one-third of the cost associated with the construction and maintenance of the building. Soon after the building was completed and the three moved their law practices into the building, disagreements arose over their respective financial obligations to the corporation. Approximately one month after Forstman removed his law practice from the building, all three attended a shareholder meeting where, in keeping with the shareholder agreement, each was reelected to the position of director. Forstman, however, refused to vote for Roach as President/Treasurer. During this meeting, Roach informed Bynum and Forstman that the par value of Legal's stock could not be increased as Bynum requested because of an outstanding $40,100.00 note Roach signed on behalf of the corporation to himself for the services he rendered as general contractor for the building. The meeting adjourned, thus leaving Roach as the holdover President/Treasurer. In April of 1976, Roach, with Forstman's consent, leased to another attorney the office space Forstman had previously occupied. The rental charged on this lease was greater than that paid by Forstman during his occupancy. At the annual meeting in March, 1977, Roach utilized the seventy percent vote requirement to successfully block several of Forstman's and Bynum's motions [1] by casting his vote against the proposals. Forstman's nomination of Bynum and himself as Legal's only directors as well as his nomination of Bynum as President/Treasurer and himself Vice President/Secretary also failed to receive Roach's assenting vote. Once again, the meeting adjourned with Roach remaining as the holdover President. On May 17, 1977, Bynum and Forstman sued for dissolution under Code 1975, § 10-2-204. [2] Roach counterclaimed for specific performance of the shareholder agreement, a determination of Forstman and Bynum's indebtedness to the corporation and, in the alternative, crossclaimed for a determination of the corporation's indebtedness to him on the note. The trial judge, sitting without a jury, found the corporation hopelessly deadlocked, determined that Roach's claim on the note was not well founded, ordered the corporation dissolved and appointed a receiver to liquidate Legal's assets. The judge also ordered the rental paid by the attorney who leased Forstman's office applied to Forstman's contributory obligations to the corporate entity.