On March 22, the Securities and Exchange Commission’s Division of Corporation Finance issued a new Compliance and Disclosure Interpretation (C&DI) regarding how a registrant must describe a Rule 14a-8 shareholder proposal on its proxy card to be in compliance with Rule 14a-4 (a)(3) of the Securities and Exchange Act of 1934.
Rule 14a-4 (a)(3) requires that the form of proxy “identify clearly and impartially each separate matter intended to be acted upon.” In that regard, C&DI clarifies that the proxy card should clearly identify and describe the specific action on which the shareholders will be asked to vote, regardless of whether it is a management or shareholder proposal. The C&DI provides the following specific examples of descriptions of proposals that would not satisfy the requirements of Rule 14 (a)(3):
- a management proposal to amend the company’s Articles of Incorporation to increase the number of authorized shares of common stock as “a proposal to amend our articles of incorporation;”
- a shareholder proposal to amend a company’s bylaws to allow shareholders holding 10 percent of the company’s common stock to call a special meeting described as “a shareholder proposal on special meetings;” and
- the following other descriptions: (1) “A shareholder proposal on executive compensation;” (2) “A shareholder proposal on the environment;” (3) “A shareholder proposal, if properly presented;” and (4) “Shareholder proposal #3.”
The complete C&DI is available here.