SEC Amends Rule 14a-8

Mayer Brown Free Writings + Perspectives

On September 23, 2020, the Securities and Exchange Commission adopted amendments to Exchange Act Rule 14a-8, the shareholder-proposal rule, which we summarize below.

Ownership threshold for submission. The amendments create a range of the amount of a company’s securities required to be held in order to submit a shareholder proposal, permitting shareholders to submit a proposal after having held $2,000 of company stock for at least three years, or higher amounts for shorter periods of time. The amendments provide for a transition period that will allow shareholders meeting specified conditions to rely on the $2,000/one-year threshold currently in effect for proposals submitted for an annual or special meetings to be held before January 1, 2023.

The amendments also:

  • prohibit aggregation to satisfy the ownership thresholds;
  • require a shareholder that uses a representative to submit its proposal to provide certain documentation demonstrating the shareholder’s identity, role and interest in the proposal; and
  • require that each shareholder state that he or she is available to meet with the company no less than 10 nor more than 30 calendar days after submission and provide certain contact and availability details.

Resubmission thresholds. The amendments revise the levels of shareholder support a proposal must receive to be eligible for resubmission at the same company’s future shareholder meetings from 3%, 6% and 10% for matters previously voted on once, twice or three or more times in the last five years, respectively, with thresholds of 5%, 15% and 25%, respectively.

One proposal rule. The amendments provide that each person may submit only one proposal, directly or indirectly, to a company for a particular meeting.  This means that a shareholder-proponent will not be permitted to submit one proposal in his or her own name and simultaneously serve as a representative to submit a different proposal on another shareholder’s behalf for consideration at the same meeting.

The amendments will be effective 60 days after publication in the Federal Register, and will apply to any proposal submitted for an annual or special meeting to be held on or after January 1, 2022, subject to the transition period noted above. The press release and fact sheet are available here.  The adopting release is available here.

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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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