SEC Adopts Amendments to Rule 14a-8: More Stringent Requirements for Shareholder Proposals Will First Apply to 2022 Proxy Season

Weil, Gotshal & Manges LLP
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On September 23, 2020, the Securities and Exchange Commission (“SEC” or “Commission”) voted, 3 to 2, to adopt amendments to Rule 14a-8 under Section 14(a) of the Securities Exchange Act of 1934, as amended (“Exchange Act”). Often referred to as the shareholder-proposal rule, Rule 14a-8 requires a company subject to the federal proxy rules to include shareholder proposals in its proxy statement and the accompanying proxy card, subject to certain procedural and substantive limitations. These amendments will impose more stringent requirements on the initial stock ownership eligibility threshold, which has not substantively changed since 1998, as well as the resubmission thresholds originally set in 1954. Together, the SEC explained, these changes “are intended to modernize and enhance the efficiency and integrity of the shareholder proposal process for the benefit of all shareholders, including to help ensure that a shareholder proponent has demonstrated a meaningful ‘economic stake or investment interest’ in a company before the shareholder may draw on company resources to require the inclusion of a proposal in the company’s proxy statement, and before the shareholder may use the company’s proxy statement to command the attention of other shareholders to consider and vote on the proposal.” However, the two dissenting Commissioners strongly disagreed, reflecting a sharp philosophical divide within the SEC.

The latest Rule 14a-8 amendments will not affect the upcoming 2021 proxy season. But for the 2022 season, as we explain in more detail below, they will make the following significant changes to the shareholder-proposal process...

Please see full Alert below for more information.

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