Deciding to Be Dissident: Proxy Contest Basics For Non-Registrants

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The proxy solicitation process is one of the key components to effective shareholder franchise. In principal, it provides shareholders of companies with diversified ownership the ability to exercise their statutory right to vote in an informed and efficient manner, allowing votes to be cast for corporate proposals without the need to attend the annual meeting or special meeting, as the case may be. The solicitation of proxies, while always of consequence, takes on an even larger role in shareholder franchise during a contested solicitation in which a dissident shareholder or group of dissident shareholders are running proposals in opposition to the company’s board of directors. In these instances, it is imperative that all applicable laws are followed in order to afford all shareholders their full and unencumbered voting rights. The laws in question are both state and federal. State law tends to speak in general terms about the power to confer a proxy, the revocability of a proxy, and general form of proxy (“proxy card”). Federal securities law, which is primarily the subject matter of this article, applies when dealing with proxies with respect to securities registered under Section 12 of the Securities Exchange Act of 1934. Such law regulates the process by which proxies are solicited and the various disclosures that must be made with the form of proxy. The article above will provide a very basic guide to non-registrants, i.e. dissident shareholders, who wish to proceed in a proxy contest.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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