§80a–16 Board of directors

Summary

Registered investment companies must have their directors chosen by the people who own the voting shares at an annual or special meeting. If a seat opens between meetings, it can be filled in any legal way only if, right after filling it, at least two-thirds of the directors then serving were elected by shareholders at such a meeting. If fewer than a majority of the current directors were elected by shareholders, the company must hold a shareholders’ meeting to elect directors within 60 days unless the Commission extends the time. Members of an advisory board are not covered. A company may split its directors into classes, but each class’ term must be at least one year and no more than five years, and at least one class’ term must end each year. If a vacancy must be filled by someone who is not an “interested person” in a transaction covered by section 80a–15(f)(1)(A), that person must be chosen by a majority of the non‑interested directors and then elected by the shareholders; if that director dies, is disqualified, or resigns in good faith, the vacancy may be filled under the rules above. The election rules do not apply to a common‑law trust that existed on August 22, 1940, under an indenture that did not provide for trustee elections. Holders of at least two‑thirds of the outstanding shares can remove a natural‑person trustee by written declaration or vote. Trustees must call a removal meeting when holders of 10% ask in writing. If ten or more record shareholders who have held shares at least six months and together own either $25,000 in net asset value or at least 1% of outstanding shares ask to send a communication to other shareholders to seek meeting signatures, trustees have five business days to give them the shareholder list or tell them the number of shareholders and mailing cost. If trustees choose the cost option, they must mail the material for a reasonable fee unless, within five business days, a majority of trustees files with the Commission a written objection saying the material is false, misleading, or illegal; the Commission will decide after a hearing, and if it refuses the objections or later finds them met, the trustees must mail the material.