§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. Temporary vacancies can be filled another legal way, but after filling them at least two-thirds of the directors must have been elected by shareholders at a meeting. If fewer than a majority of the current directors were elected by shareholders, the company must call a shareholders’ meeting to elect directors as soon as possible and in any case within 60 days, unless the Commission extends that time. Advisory board members are not covered. A company may split its board into classes if its governing documents or law allow it, but no class can be elected for less than one year or more than five years, and at least one class’s term must end each year. If a board vacancy must be filled by someone who is not an “interested person” under section 80a–15(f)(1)(A), that person must be chosen and proposed by a majority of the non-interested directors and then elected by the shareholders; if such a director dies, is disqualified, or resigns in good faith, the vacancy may be filled under the general rule above. Special rules apply to common-law trusts that existed on August 22, 1940 and whose trust indenture did not provide for trustee elections: a natural person can be removed as trustee if holders of not less than two-thirds of the outstanding shares declare removal in writing filed with the custodian or vote at a meeting. Trustees must call a meeting when holders of at least 10% request it in writing. Ten or more long‑term shareholders who together hold either $25,000 in net asset value or at least 1% of shares (whichever is less) may ask trustees to help send a communication to other shareholders; trustees then have five business days to give access to the shareholder list or to tell the applicants the approximate number of shareholders and mailing cost. If trustees ask to handle the mailing, they must do so when given the material and reasonable postage unless within five business days they file with the Commission a majority-signed statement saying the material is false, misleading, or unlawful and explaining why. After a hearing the Commission may uphold or reject such objections; if the objections are rejected or later fixed, the trustees must mail the materials promptly after the Commission’s order and a renewed offer to pay.