On November 5, 2019, the Securities and Exchange Commission (SEC) announced proposed amendments to modernize Exchange Act Rule 14a-8, also known as the “shareholder proposal rule.” The current shareholder proposal rule requires companies subject to the federal proxy rules to include shareholder proposals in their proxy statements unless the shareholder proposals fail to satisfy certain procedural and substantive requirements. The proposed amendments would modify two of the rule’s procedural requirements and one of its substantive requirements. The SEC press release announcing the proposed changes is available here and the proposed rule release is available here.
If adopted, the proposed amendments would make the following changes to the current shareholder proposal rule:
- tighten the minimum ownership requirements that a shareholder must satisfy to be eligible to have a shareholder proposal included in a company’s proxy statement, generally replacing the current $2,000 or 1% ownership criteria with a sliding scale ($2,000, $15,000 and $25,000) based on the number of years the shareholder held the requisite amount of shares, eliminating the 1% ownership criteria, and no longer allowing multiple shareholders to aggregate their securities holdings to meet the thresholds;
- revise the “one proposal” rule to clarify that a single person may not submit multiple proposals at the same shareholder’s meeting, whether the person submits a proposal as a shareholder or as a representative of a shareholder; and
- increase the levels of shareholder support a proposal must receive to be eligible for resubmission at the same company’s future shareholder meetings, from 3%, 6% and 10%, to 5%, 15% and 25%, respectively, and allow for exclusion of a proposal that received less than 50% support after 3 years and experienced a decline in shareholder support of 10% or more compared to the prior year.
The public comment period will remain open for 60 days following publication of the proposed rule release in the Federal Register.
Disclaimer
While we are pleased to have you contact us by telephone, surface mail, electronic mail, or by facsimile transmission, contacting Kilpatrick Townsend & Stockton LLP or any of its attorneys does not create an attorney-client relationship. The formation of an attorney-client relationship requires consideration of multiple factors, including possible conflicts of interest. An attorney-client relationship is formed only when both you and the Firm have agreed to proceed with a defined engagement.
DO NOT CONVEY TO US ANY INFORMATION YOU REGARD AS CONFIDENTIAL UNTIL A FORMAL CLIENT-ATTORNEY RELATIONSHIP HAS BEEN ESTABLISHED.
If you do convey information, you recognize that we may review and disclose the information, and you agree that even if you regard the information as highly confidential and even if it is transmitted in a good faith effort to retain us, such a review does not preclude us from representing another client directly adverse to you, even in a matter where that information could be used against you.
