The big news at the Securities and Exchange Commission last week was that it would not seek to overturn the D.C. Court of Appeals’ decision vacating Rule 14a-11 (See D.C. Circuit Delivers Harsh Judgment on SEC Rule 14a-11 and Business Roundtable v. SEC – Winners and Losers). When the SEC adopted Rule 14a-11, it also approved amendments to Rule 14a-8. The SEC stayed the effectiveness of those amendments during the litigation over Rule 14a-11.
Now that the Rule 14a-11 litigation has ended, the amendments to Rule 14a-8 will become effective. According to this statement by SEC Chairwoman Mary Schapiro, this is likely to occur tomorrow. As a result, companies will no longer be able to rely on Rule 14a-8(i)(8) to exclude a proposal seeking to establish a procedure in a company’s governing documents for the inclusion of one or more shareholder nominees for director in the company’s proxy materials. Consequently, I expect to see more shareholder proposals seeking to amend corporate bylaws. However, whether shareholders have the power to amend bylaws unilaterally is a function of state law. Thus, now is a good time to review state law authority to adopt and amend bylaws.
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