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An Introduction to the Law of Corporations: Cases and Materials

DGCL Sec. 213 - Record dates

Prior to any stockholder meeting, the board must set a “record date” for determining who are the stockholders of the corporation who have the right to vote at the meeting. 

Determining who is a stockholder for the purposes of notice and the right to vote at a meeting can be more complex than you might initially think. In a private corporation, like a start-up, determining who are the record stockholders entitled to notice and to vote at a meeting is, typically, a simple matter. Shares of a private corporation are not transferrable and are held by a relatively small number of easily identifiable persons. One need only refer to the corporation's stock ledger (usually an Excel spreadsheet) to determine who are the stockholders. 

On the other hand, determining who is a stockholder in a modern publicly-traded corporation is an altogether different matter. In publicly-traded corporations, there are potentially millions of stockholders and the demographic of the stockholding base turns over regularly as traders in the market buy and sell shares of the corporation. Determining who is a stockholder for purposes of receiving notice of a meeting and then being entitled to vote at that meeting is difficult. For one thing, a stockholder who is given notice today may very well not be a stockholder of the corporation 45 days later when the meeting is actually held.

Later, when we discuss stockholder lists and §219, you will be introduced to the complexities of the system that has been gerry-rigged to try to deal with the question of "record ownership" and "beneficial ownership" in a fast-paced trading environment. For now, though, note that §213 tries to deal with some obvious issues.

By permitting a board to separate a stockholder's right to receive notice of a meeting and the identification of stockholders entitled to vote at a meeting, §213 acknowledges the reality that in many corporations there will be significant turnover in the stockholding demographic between notice and the meeting. Consequently, a board may, pursuant to §213, elect to fix a date for providing stockholder notice for a meeting that that is different from the date to determine which stockholders have the actual right to vote. For purposes of providing notice, a board may select a day between 10-60 days in advance of a meeting. For purposes of deciding who actually gets to vote, the board may select any day as late as the last day preceding the meeting. By permitting a board to identify stockholders entitled to vote at a point in time much closer to the meeting day, drafters of the statute hope the actual stockholding demographic more closely resembles those who have been identified as having the right to vote at a meeting.