New Golden Parachute Compensation Disclosure and Shareholder Advisory Vote Requirements

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The Securities and Exchange Commission’s (the “SEC”) new disclosure and advisory vote requirements for compensation based on or relating to merger and similar transactions, often referred to as golden parachute arrangements, became effective for proxy statements and other acquisition related filings initially filed on or after April 25, 2011. The SEC adopted the rules to implement Section 951 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”).1 Now that the new golden parachute compensation requirements are effective, we wanted to offer some considerations for compliance with the new requirements as well as provide discussion of some practical issues that may arise in preparing the new disclosure.

The SEC adopted new Rule 14a-21(c), which provides that if a solicitation is made by the issuer for a meeting of shareholders at which the shareholders are asked to approve an acquisition, merger, consolidation, or proposed sale or other disposition of all or substantially all assets of the issuer, then the issuer must provide a separate shareholder vote to approve any agreements or understandings disclosed pursuant to Item 402(t) of Regulation S-K. However, as described below, if such agreements or understandings have been subject to a shareholder advisory vote under Rule 14a-21(a) (the “Say-on-Pay” vote), then a separate shareholder vote is not required.

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Morrison & Foerster LLP on:

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