A proxy contest occurs when a group of shareholders seeks to gain control of a company by persuading other shareholders to vote for their proposed changes, often during an annual meeting. This can involve replacing board members or altering company policies. Shareholders use proxies, which are legal documents allowing them to vote on their behalf, to influence the outcome. These contests typically arise when there is a disagreement between management and shareholders over the direction of the company. Activist investors, such as hedge funds or institutional investors, often initiate proxy contests to push for changes they believe will enhance shareholder value.