As required by Section 971 of Dodd-Frank, the SEC proposed and recently adopted new Rule 14a-11,5 which requires a public reporting company to include in its proxy statement and on its proxy card the name of a person or persons nominated by a shareholder or group of shareholders for election to the company’s board of directors, and to include specific disclosures about such nominee or nominees and the nominating security holder or holders. The rule was to become effective on November 15, 2010, but the SEC stayed its implementation pending a petition for judicial review.
The judicial review resulted from a petition filed by the Business Roundtable and the U.S. Chamber of Commerce with the Court of Appeals for the D.C. Circuit on September 29, 2010, alleging that the proxy access rules are arbitrary and capricious in violation of the Administrative Procedure Act; the SEC had failed to adequately assess the rules’ effects on efficiency, competition and capital formation as required by the federal securities laws; and the rules violate companies’ First and Fifth Amendment rights under the U.S. Constitution. While the rules will not be effective until the petition for judicial review is resolved, the parties and the court have agreed on an expedited briefing schedule that contemplates the filing of final briefs by February 2011. Based on this schedule, it is possible that oral arguments could be held in spring 2011, with a decision by the court in summer 2011.
As a result of the court challenge and the SEC stay, public companies will not have to comply with Rule 14a-11 for the 2011 proxy season.