The SEC notes it will defer to a court's decision to exclude shareholder proposals. Companies faced with unwelcome shareholder proposals might consider seeking declaratory judgments to exclude them.
As an alternative to filing a Rule 14a-8 No-action Letter Request with the U.S. Securities and Exchange Commission (SEC), a company may seek a declaratory judgment from a federal court to exclude a shareholder's proposal from its proxy materials. A federal court recently allowed a shareholder proposal to be excluded from a company's proxy materials, based on the proposing shareholder's failure to properly demonstrate ownership of the company's shares.
The court concluded that:
A company has standing under the Declaratory Judgment Act to challenge a shareholder proposal, even if the proposing shareholder promises not to sue if the proposal is excluded.
A shareholder must comply with the proof-of-ownership requirements to submit a proposal.
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