Legally, how will the exchange work?

The proxy exchange will allow shareholders to select anyone they like to exercise the proxy rights they beneficially own. It may appear that each transaction on the exchange will be a legal assignment of proxy rights. Intuitively, the exchange will work that way, but a cleaner legal mechanism is available for achieving the same result.

Legally, the proxy exchange will serve as the proxy for everyone. It will hold all proxy rights, and it will exercise those proxy rights according to the instructions of the beneficiaries. If a beneficiary chooses to vote her own shares, the exchange will vote the shares according to her instructions. If she uses the exchange to transfer her voting rights to an aggregator, the transaction will legally be nothing more than her instructing the exchange to exercise the proxy rights on her behalf according to the aggregator's instructions.

Although transactions on the proxy exchange will not legally be assignments of proxy rights, exchange rules can largely treat them as if they were. Those rules may be written to comply with the spirit, if not the letter, of applicable statutes, regulations and case law governing assignments of proxy rights.