Resolution Introduced to Invalidate Revisions to Shareholder Proposal Rules

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Stinson - Corporate & Securities Law Blog

In September 2020 the SEC adopted final rules altering the shareholder proposal framework for the first time in 20 years. Following another split-vote of the Commissioners, the SEC approved modifications to the current shareholder ownership threshold for initial submissions as well as the shareholder support levels required for resubmissions of proposals and adopted several other notable changes.

Now, following the change in administrations, a resolution has been introduced to invalidate the revised rules under the Congressional Review Act.  The CRA empowers Congress to review, by means of an expedited legislative process, new federal regulations issued by government agencies and, by passage of a joint resolution, to overrule a regulation. Once a rule is thus repealed, the CRA also prohibits the reissuing of the rule in substantially the same form or the issuing of a new rule that is substantially the same “unless the reissued or new rule is specifically authorized by a law enacted after the date of the joint resolution disapproving the original rule.”

The resolution that has been introduced is very simple:

Resolved by the Senate and House of Representatives of the United States of America in Congress assembled, That Congress disapproves the rule submitted by the Securities and Exchange Commission relating to “Procedural Requirements and Resubmission Thresholds Under Exchange Act Rule 14a–8’’ (85 Fed. Reg. 70240 (November 4, 2020)), and such rule shall have no force or effect.

Additional background information can be found in Liz Dunshee’s blog at TheCorporateCounsel.net.

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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