Chapter 180

180.0728(4) (4) For purposes of this section, votes against a candidate are not given legal effect and are not counted as votes cast in an election of directors.

180.0728 History History: 1989 a. 303; 1991 a. 16.

180.0730 180.0730 Voting trusts.

180.0730(1) (1) One or more shareholders may create a voting trust, conferring on a trustee the right to vote or otherwise act for them, by signing an agreement setting out the provisions of the trust and transferring their shares to the trustee. The voting trust agreement may include any provision consistent with the voting trust’s purpose. When a voting trust agreement is signed, the trustee shall prepare a list of the names and addresses of all owners of beneficial interests in the trust, together with the number and class of shares each transferred to the trust, and deliver copies of the list and agreement to the corporation’s principal office.

180.0730(2) (2) A voting trust becomes effective on the date that the first shares subject to the trust are registered in the trustee’s name.

180.0730 History History: 1989 a. 303.

180.0731 180.0731 Voting agreements.

180.0731(1) (1) Two or more shareholders may provide for the manner in which they will vote their shares by signing an agreement for that purpose. A voting agreement created under this section is not subject to s. 180.0730.

180.0731(2) (2) A voting agreement created under this section is specifically enforceable.

180.0731 History History: 1989 a. 303.

180.0740 180.0740 Definitions applicable to ss. 180.0740 to 180.0747. In ss. 180.0740 to 180.0747:

180.0740(1) (1) “Beneficial owner” means a person whose shares are held in a voting trust or held by a nominee on the person’s behalf.

180.0740(2) (2) “Derivative proceeding” means a civil suit in the right of a domestic corporation or, to the extent provided in ss. 180.0743 and 180.0745 to 180.0747, in the right of a foreign corporation.

180.0740 History History: 1989 a. 303; 1991 a. 16.

180.0741 180.0741 Standing. A shareholder or beneficial owner may not commence or maintain a derivative proceeding unless the shareholder or beneficial owner satisfies all of the following:

180.0741(1) (1) Was a shareholder or beneficial owner of the corporation at the time of the act or omission complained of or became a shareholder or beneficial owner through transfer by operation of law from a person who was a shareholder or beneficial owner at that time.

180.0741(2) (2) Fairly and adequately represents the interests of the corporation in enforcing the right of the corporation.

180.0741 History History: 1989 a. 303; 1991 a. 16.

180.0741 Annotation A plaintiff does not fairly and adequately represent the interest of the corporation when a derivative action is used for personal advantage. Whether or not a personal agenda exists is determined by the trial court. Read v. Read, 205 Wis. 2d 558, 561 N.W.2d 768 (Ct. App. 1996), 95-2453.

180.0741 Annotation To bring an individual claim for breach of fiduciary duty, the complaint must allege facts sufficient, if proved, to show an injury personal to the complainant, rather than primarily to the corporation. The plaintiff must also show that each defendant had a fiduciary duty to the plaintiff in respect to corporate affairs that to each defendant constitutes a breach. Generally a claim of waste of corporate assets must be brought in a derivative action and not as a direct action. Reget v. Paige, 2001 WI App 73, 242 Wis. 2d 278, 626 N.W.2d 302, 99-0838.

180.0741 Annotation Derivative claims are those a corporation could bring because the corporation’s assets are affected. If the injury is one primarily to the corporation, a plaintiff must allege that it was a registered shareholder at the time of the transaction of which it complains. The failure to plead registered shareholder status requires the dismissal of derivative claims. Borne v. Gonstead Advanced Techniques, Inc., 2003 WI App 135, 266 Wis. 2d 253, 667 N.W.2d 709, 01-2624.

180.0741 Annotation To have standing pursuant to this section, one must be a current shareholder to initiate a claim on behalf of the corporation. Krier v. Vilione, 2009 WI 45, 317 Wis. 2d 288, 766 N.W.2d 517, 06-1573.

180.0742 180.0742 Demand. No shareholder or beneficial owner may commence a derivative proceeding until all of the following occur:

180.0742(1) (1) A written demand is made upon the corporation to take suitable action.

180.0742(2) (2) Ninety days expire from the date on which the demand was made, unless the shareholder or beneficial owner is notified before the expiration of 90 days that the corporation has rejected the demand or unless irreparable injury to the corporation would result by waiting for the expiration of the 90-day period.

180.0742 History History: 1989 a. 303; 1991 a. 16.

180.0743 180.0743 Stay of proceedings. If the domestic corporation or foreign corporation commences an inquiry into the allegations made in the demand or complaint, the court may stay any derivative proceeding for the period that the court considers appropriate.

180.0743 History History: 1989 a. 303; 1991 a. 16.

180.0744 180.0744 Dismissal.

180.0744(1) (1) The court shall dismiss a derivative proceeding on motion by the corporation if the court finds, subject to the burden of proof assigned under sub. (5) or (6), that one of the groups specified in sub. (2) or (6) has determined, acting in good faith after conducting a reasonable inquiry upon which its conclusions are based, that maintenance of the derivative proceeding is not in the best interests of the corporation.

180.0744(2) (2) Unless a panel is appointed under sub. (6), the determination in sub. (1) shall be made by any of the following:

180.0744(2)(a) (a) A majority vote of independent directors present at a meeting of the board of directors if the independent directors constitute a quorum.

180.0744(2)(b) (b) A majority vote of a committee consisting of 2 or more independent directors appointed by majority vote of independent directors present at a meeting of the board of directors, whether or not the voting, independent directors constitute a quorum.

180.0744(3) (3) Whether a director is independent for purposes of this section may not be determined solely on the basis of any one or more of the following factors:

180.0744(3)(a) (a) The nomination or election of the director by persons who are defendants in the derivative proceeding or against whom action is demanded.

180.0744(3)(b) (b) The naming of the director as a defendant in the derivative proceeding or as a person against whom action is demanded.

180.0744(3)(c) (c) The approval by the director of the act being challenged in the derivative proceeding or demand if the act resulted in no personal benefit to the director.

180.0744(4) (4) If a derivative proceeding is commenced after a determination was made rejecting a demand by a shareholder or beneficial owner, the complaint shall allege with particularity facts establishing any of the following:

180.0744(4)(a) (a) That a majority of the board of directors did not consist of independent directors at the time that the determination was made.

180.0744(4)(b) (b) That the requirements of sub. (1) have not been met.

180.0744(5) (5) If a majority of the board of directors did not consist of independent directors at the time that the determination rejecting a demand was made, the corporation shall have the burden of proving that the requirements of sub. (1) have been met. If a majority of the board of directors consisted of independent directors at the time that the determination was made, the shareholder or beneficial owner shall have the burden of proving that the requirements of sub. (1) have not been met.

180.0744(6) (6) Upon motion by the corporation, the court may appoint a panel of one or more independent persons to determine whether maintenance of the derivative proceeding is in the best interests of the corporation. If a panel is appointed under this subsection, the shareholder or beneficial owner shall have the burden of proving that the requirements of sub. (1) have not been met.

180.0744 History History: 1991 a. 16, 173.

180.0744 Annotation A special litigation committee formed under sub. (2) (b) shall be examined carefully by a circuit court to determine whether its members are independent. The test is whether a committee member has a relationship with a defendant or the corporation that would be reasonably expected to affect the member’s judgment with respect to litigation in issue. Einhorn v. Culea, 2000 WI 65, 235 Wis. 2d 646, 612 N.W.2d 78, 97-3592.

180.0745 180.0745 Discontinuance or settlement. A derivative proceeding may not be discontinued or settled without the court’s approval. If the court determines that a proposed discontinuance or settlement will substantially affect the interests of the beneficial owners, the shareholders or a class of shareholders of the domestic corporation or foreign corporation, the court shall direct that notice be given to the shareholders and beneficial owners affected.

180.0745 History History: 1989 a. 303.

180.0746 180.0746 Payment of expenses. On termination of the derivative proceeding, the court may do any of the following:

180.0746(1) (1) Notwithstanding s. 814.04 (1), order the domestic corporation or foreign corporation to pay the plaintiff’s reasonable expenses, including attorney fees, incurred in the derivative proceeding by the shareholder or beneficial owner who commenced or maintained the derivative proceeding if the court finds that the derivative proceeding has resulted in a substantial benefit to the domestic corporation or foreign corporation.

180.0746(2) (2) Order the shareholder or beneficial owner who commenced or maintained the derivative proceeding to pay any defendant’s reasonable expenses, including attorney fees, notwithstanding s. 814.04 (1), incurred in defending the derivative proceeding if it finds that the derivative proceeding was commenced or maintained without reasonable cause or for an improper purpose.

180.0746 History History: 1989 a. 303; 1991 a. 16.

180.0747 180.0747 Applicability to foreign corporations. In any derivative proceeding in the right of a foreign corporation, the matters covered by ss. 180.0741, 180.0742 and 180.0744 shall be governed by the laws of the jurisdiction of incorporation of the foreign corporation.

180.0747 History History: 1989 a. 303; 1991 a. 16.

subch. VIII of ch. 180 SUBCHAPTER VIII

DIRECTORS AND OFFICERS

180.0801 180.0801 Requirement for and duties of board of directors.

180.0801(1) (1) Except as provided in s. 180.1821, a corporation shall have a board of directors.

180.0801(2) (2) All corporate powers shall be exercised by or under the authority of, and the business and affairs of the corporation managed under the direction of, its board of directors, subject to any limitation set forth in the articles of incorporation.

180.0801 History History: 1989 a. 303.

180.0802 180.0802 Qualifications of directors. The articles of incorporation or bylaws may prescribe qualifications for directors. A director need not be a resident of this state or a shareholder of the corporation unless the articles of incorporation or bylaws so prescribe.

180.0802 History History: 1989 a. 303.

180.0803 180.0803 Number and election of directors.

180.0803(1) (1) A board of directors shall consist of one or more natural persons, with the number specified in or fixed in accordance with the articles of incorporation or bylaws.

180.0803(2) (2) The number of directors may be increased or, subject to s. 180.0805 (2), decreased from time to time by amendment to, or in the manner provided in, the articles of incorporation or the bylaws.

180.0803(3) (3) Directors shall be elected at the first annual shareholders’ meeting and at each annual meeting thereafter unless their terms are staggered under s. 180.0806.

180.0803 History History: 1989 a. 303.

180.0804 180.0804 Election of directors by certain classes of shareholders. If the articles of incorporation authorize dividing the shares into classes, the articles of incorporation may also authorize the election of all or a specified number of directors by the holders of one or more authorized classes of shares. A class or classes of shares entitled to elect one or more directors shall be a separate voting group for purposes of the election of directors.

180.0804 History History: 1989 a. 303.

180.0805 180.0805 Terms of directors generally.

180.0805(1) (1) The terms of the directors of a corporation, including the initial directors, expire at the next annual shareholders’ meeting unless their terms are staggered under s. 180.0806.

180.0805(2) (2) A decrease in the number of directors may not shorten an incumbent director’s term.

180.0805(3) (3) Despite the expiration of a director’s term, the director shall continue to serve, subject to ss. 180.0807, 180.0808 and 180.0809, until his or her successor is elected and, if necessary, qualifies or until there is a decrease in the number of directors.

180.0805 History History: 1989 a. 303.

180.0806 180.0806 Staggered terms of directors. The articles of incorporation or the bylaws, if the articles of incorporation so provide, may provide for staggering the terms of the directors by dividing the total number of directors into 2 or 3 groups. In that event, the terms of directors in the first group expire at the first annual shareholders’ meeting after their election, the terms of the 2nd group expire at the 2nd annual shareholders’ meeting after their election, and the terms of the 3rd group, if any, expire at the 3rd annual shareholders’ meeting after their election. At each annual shareholders’ meeting held thereafter, the number of directors equal to the number of the group whose term expires at the time of the meeting shall be chosen for a term of 2 years, if there are 2 groups, or a term of 3 years, if there are 3 groups.

180.0806 History History: 1989 a. 303.

180.0807 180.0807 Resignation of directors.

180.0807(1) (1) A director may resign at any time by delivering written notice that complies with s. 180.0141 to the board of directors, to the chairperson of the board of directors or to the corporation.

180.0807(2) (2) A resignation is effective when the notice is delivered unless the notice specifies a later effective date.

180.0807 History History: 1989 a. 303.

180.0808 180.0808 Removal of directors by shareholders.

180.0808(1) (1) The shareholders may remove one or more directors with or without cause unless the articles of incorporation or bylaws provide that directors may be removed only for cause.

180.0808(2) (2) If a director is elected by a voting group of shareholders, only the shareholders of that voting group may participate in the vote to remove that director.

180.0808(3) (3) If cumulative voting is authorized under s. 180.0728, the shareholders may not remove a director if the number of votes sufficient to elect the director under cumulative voting is voted against his or her removal. If cumulative voting is not authorized under s. 180.0728, the shareholders may remove a director only if the number of votes cast to remove the director exceeds the number of votes cast not to remove him or her, unless the articles of incorporation or bylaws adopted under authority granted in the articles of incorporation provide for a greater voting requirement under s. 180.0727 (1).

180.0808(4) (4) A director may be removed by the shareholders only at a meeting called for the purpose of removing the director, and the meeting notice shall state that the purpose, or one of the purposes, of the meeting is removal of the director.

180.0808 History History: 1989 a. 303; 1991 a. 16.

180.0809 180.0809 Removal of directors by judicial proceeding.

180.0809(1) (1) The circuit court for the county where a corporation’s principal office or, if none in this state, its registered office is located may remove a director of the corporation from office in a proceeding brought either by the corporation or by its shareholders holding at least 10 percent of the outstanding shares of any class, if the court finds all of the following:

180.0809(1)(a) (a) That the director engaged in fraudulent or dishonest conduct, or gross abuse of authority or discretion, with respect to the corporation.

180.0809(1)(b) (b) That removal is in the best interest of the corporation.

180.0809(2) (2) The court that removes a director may bar the director from reelection for a period prescribed by the court.