Meaning
Performance of a formal act or the signing of a binding agreement through an authorized agent allows for the transaction of business when principals are absent. A proxy execution is commonly used in shareholder meetings where an investor delegates their voting power to another person. The legal basis for this action is found in the written appointment of the proxy which must be filed before the meeting begins.
This mechanism ensures that a quorum can be reached even if majority owners are in different time zones.
Representative Right
Authorization to act on behalf of another party is limited by the specific instructions contained in the proxy form. During a proxy execution, the agent must follow any constraints regarding the direction of the vote or the limit of the financial commitment. If the agent exceeds these bounds, the principal may be able to disaffirm the resulting contract.
Agency Risk
Misalignment between the interests of the principal and the agent can lead to the misuse of delegated power. A proxy execution requires a high degree of trust because the signature of the agent binds the principal just as if they had signed it themselves. Companies often use professional proxy firms to handle the logistics of voting in large public corporations.
Legal Basis
Validity of the signature depends on the underlying power of attorney or the corporate bylaws. A proxy execution must be supported by evidence that the delegation was made by a person with the right to grant it. Without this documentary trail, the registry may refuse to record the action taken by the agent.
