At the end of last week, Corp Fin issued three new CDIs related to universal proxies under Rule 14a-19. In November 2021, the SEC amended the federal proxy rules to mandate the use of universal proxies in all non-exempt solicitations in connection with contested elections of directors of operating companies. By mandating the use of universal proxies—proxy cards that, when used in a contested election, include a complete list of all candidates for director duly nominated by both management and dissidents—the SEC’s rules now allow a shareholder voting by proxy to choose among director nominees in an election contest in a manner that closely mirrors in-person voting. (See this PubCo post.) The new CDIs address questions that have arisen in connection with notice and proxy statement disclosure. Below are brief summaries.

Rule 14a-19 requires that proxy cards used in a non-exempt solicitation in connection with a contested election include the names of all duly nominated candidates for election to the board presented for election by any party and for whom proxies are solicited, including any proxy access nominees that have satisfied applicable requirements.

Question 139.01. Under Rule 14a-19, in an election contest, a dissident shareholder must provide the company with the names of the dissident’s nominees at least 60 calendar days before the anniversary of the prior year’s annual meeting date. According to Corp Fin, the dissident cannot provide the company with a long list of names of more nominees than there are seats and then finalize its slate after the Rule 14a-19(b) deadline. That would be inconsistent with the purpose of the rules. The Rule 14a-19(b) notice “must contain only the names of nominees for whom the dissident shareholder intends to solicit proxies. The purpose of this requirement is to provide a definitive date by which the parties in a contested election will have the names of all nominees in order to compile a universal proxy card.”

That doesn’t mean, however, that a dissident can’t ever change its slate after the deadline. For example, the dissident may need to make a change because a nominee withdraws or the company increases the number of director seats up for election. Accordingly, “the staff will not object if the dissident shareholder includes in its Rule 14a-19(b) notice: (1) the names of the nominees for whom it intends to solicit proxies and (2) the names of additional or alternate nominees who, in accordance with the registrant’s governing documents and state law, would be presented for election in the event of a need to change the original slate, so long as the notice clearly identifies the persons who are being presented as additional or alternate nominees. If the dissident shareholder later changes its slate to include any of the additional or alternate nominees, then it must promptly notify the registrant of the change as required by Rule 14a-19(c).” The same applies to a company that wants “to include in its Rule 14a-19(d) notice the names of more nominees than director seats up for election.”

Question 139.02. Under Rule 14a-19, both the company and a dissident shareholder in an election contest must send to each other notices of the names of their respective nominees. But what happens when there are multiple dissidents? Although the situation is not directly addressed in the rule, Corp Fin considers the company to be “best positioned to notify all parties of the slates submitted by the dissident shareholders.” Accordingly, the company “should notify each dissident shareholder, by the deadline prescribed in Rule 14a-19(d), of not only the names of its nominees and any nominees submitted under a ‘proxy access’ provision but also of the names of any other persons nominated by another dissident shareholder who provided a Rule 14a-19(b) notice. This view also applies to the Rule 14a-19 requirements with respect to prompt notifications of any changes in the registrant’s and dissident shareholders’ slates of nominees.”

Question 139.03. Rule 14a-5(e)(4) requires the company to disclose in its proxy statement the Rule 14a-19(b)(1) deadline for a dissident shareholder to provide notice of its director nominees for election at the next annual meeting. The deadline under Rule 14a-19(b)(1) is generally no later than 60 calendar days before the anniversary of the prior year’s annual meeting. But what to do if the company’s advance notice bylaws impose an earlier deadline? According to Corp Fin, where the company’s advance notice bylaws require earlier notice than Rule 14a-19(b)(1), then the company could disclose only the earlier advance notice bylaw deadline; that disclosure would satisfy Rule 14a-5(e)(4) because that rule establishes a minimum, not a maximum, notice period for a dissident shareholder to inform the company and “does not override or supersede a longer period established in the registrant’s governing documents.” Corp Fin provides a reminder, however, that Rule 14a-19(b) requires other “specific information to be included in the notice, such as a statement that the dissident shareholder intends to solicit the holders of shares representing at least 67% of the voting power of shares entitled to vote on the election of directors.” The company should ensure that its proxy statement clearly states the need for a dissident shareholder to comply with the additional requirements of Rule 14a-19(b), whether or not those requirements are stated in its advance notice bylaws.

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