Cumulative voting: how the minority elects directors (art. 263 LGS)

Article 263 of the General Companies Law grants shareholders cumulative voting: the right to elect up to one third of the board seats by concentrating their votes. The bylaws may not repeal it or regulate it in a way that hinders its exercise, nor may the board be renewed in staggered form to neutralize it.

What article 263

Article 263 establishes cumulative voting as a tool for the minority to gain access to the board.

Source: Law 19,550, art. 263 — InfoLEG (updated official text)

Commentary

Cumulative voting allows a shareholder to concentrate all their votes on a few candidates, to enable the minority to gain access to the board (up to one third of the seats). It is one of the main tools protecting minority shareholders in a corporation.

The law protects it from maneuvers: the bylaws may not repeal it or hinder it, and it prohibits staggered renewal of the board when used to prevent it. The procedure requires notifying the company at least three business days in advance; once complied with by a single shareholder, all shareholders become entitled to vote under this system.

Distinctions often confused

Practical impact

Cumulative voting is key for the minority to have representation on the board. The procedure (prior notice) should be understood, and bylaw clauses attempting to neutralize it (staggered renewal) should be watched for.

Frequently asked questions