In July 2007, the SEC adopted amendments to the proxy rules under the Securities Exchange Act of 1934 that will replace the previously established voluntary "notice and access model" with a mandatory "notice and access model" (commonly referred to as "universal" or "mandatory" e-proxy). The notice and access model requires, among other things, that issuers (and others): (i) make their proxy materials available to shareholders via an Internet website, and (ii) deliver a notice to shareholders that informs them that the proxy materials are available, explains how to access them and includes other required information.
The "Notice and Access Model"
Under the notice and access model issuers can elect to provide proxy materials via:
(1) the "notice only option";
(2) the "full set delivery option"; or
Regardless of the option (or combination of options) selected, issuers will now be required to provide shareholders with:
- a "Notice of Internet Availability of Proxy Materials" (the "Notice"), and
- access to the proxy materials (i.e., the proxy or information statement, proxy card and, if required, the annual report), on or before the date that the Notice is sent, by posting the proxy materials in a readable and printable format on an Internet website (other than the EDGAR website) that meets specified confidentiality criteria. The Notice must be filed with the SEC as additional soliciting material. Any subsequent soliciting materials or amendments also must be posted on the website and access to all proxy materials, including the Notice, must be maintained on the website through the conclusion of the shareholder meeting. Note, however, that the notice and access rules do not apply to proxy solicitations in connection with business combination transactions.
The Notice Only Option
The notice only option mirrors the previous voluntary notice and access rules. In addition to providing the Notice to shareholders and posting its proxy material on an Internet website, an issuer must:
- send the Notice to shareholders at least 40 days before the shareholders meeting;
- provide shareholders with a method to execute proxies as of the time the Notice is first sent (as long as the method selected does not give shareholders a means to vote without first having access to the proxy materials, such methods may include electronic voting platforms, toll-free telephone numbers, or printable or downloadable proxy cards);
- refrain from sending a paper or e-mail proxy card to shareholders until10 calendar days after the date that the Notice was first sent (unless the proxy card is accompanied or preceded by a copy of the proxy statement and, if required, the annual report, sent via the same medium);
- deliver paper or e-mail copies of the proxy materials at no charge within three business days to shareholders who make a request for the materials prior to the shareholder meeting; and
- establish a toll-free telephone number, e-mail address and web address that shareholders can use to request paper or e-mail copies of proxy materials or to make a permanent request for paper or e-mail copies of proxy materials for all shareholder meetings.
The Full Set Delivery Option
Although issuers using the full set delivery option also must send shareholders a Notice and post the proxy materials on an Internet website, this option is otherwise the same as the traditional method of delivering proxy materials to shareholders and an issuer choosing this option:
- may deliver a full set of proxy materials to shareholders along with the Notice;
- does not need to prepare and deliver a separate Notice if the issuer incorporates all of the information required to appear in the Notice into its proxy statement and proxy card;
- does not need to respond to shareholder requests for copies of the proxy materials; and
- does not need to comply with the other requirements of the notice only option.
Impact on Intermediaries
If requested by the issuer, intermediaries (i.e., banks, brokers or other nominees that own shares "of record" for beneficial owners) must distribute proxy materials to beneficial owners in accordance with the notice and access model.
The Notice sent by intermediaries must include certain information tailored specifically for beneficial owners and, therefore, issuers are required to provide any information the intermediary will need to prepare its Notice in sufficient time for the intermediary to comply with the timeframes of the notice only or full delivery option.
If the issuer is using the notice only option, intermediaries must send the Notice to beneficial owners at least 40 calendar days before the shareholder meeting date and provide shareholders with a means to access a request for voting instructions no later than the date the Notice is first sent. An intermediary can elect to post the proxy materials on its own website or direct beneficial owners to the issuer's website (as long as the intermediary notifies beneficial owners that their proxies cannot be submitted through the issuer's website). An intermediary must respond to requests from beneficial owners for paper or e-mail copies of the proxy materials and beneficial owners can permanently elect to receive paper or e-mail copies of the proxy material from the intermediary.
set of proxy materials provided by the issuer to beneficial owners within five business days of receipt from the issuer or the issuer's agent (as was the case prior to the July amendments) and must also include the Notice with the proxy materials or incorporate any information required in the Notice, but not appearing in the issuer's proxy statement, in the intermediary's request for voting instructions.
Impact on Soliciting Persons
Soliciting persons other than the issuer also must comply with the notice and access rules; however, the amendments treat such soliciting persons differently from the issuer in certain respects. For example, because the soliciting person may initiate an opposing solicitation before becoming aware of all of the agenda items to be voted on at the shareholder meeting, the Notice delivered by soliciting persons need only contain those agenda items known by the soliciting person at the time the Notice is sent to shareholders. However, the Notice must clearly state whether execution of the soliciting person's proxy card would invalidate the shareholder's prior vote (using the issuer's card) on matters not presented on the soliciting person's proxy card.
Conversely, because a soliciting person may initiate an opposing solicitation after the issuer has sent its Notice or proxy materials, soliciting persons using the notice only option may send a Notice to the shareholders being solicited by the later of: (1) 40 calendar days prior to the shareholder meeting date (or prior to the date that votes, consents, or authorizations may be used to effect the corporate action), or (2) ten calendar days after the date that the issuer first sends its proxy statement or Notice to shareholders.
Consistent with the current proxy rules, soliciting persons are not required to solicit every shareholder or to furnish the Notice and proxy materials to shareholders who are not being solicited.
Voluntary and Mandatory Compliance Dates
Large accelerated issuers (other than investment companies) are required to comply with the notice and access model for proxy solicitations commencing on or after January 1, 2008. All other issuers (including investment companies) and persons other than issuers are required to comply for proxy solicitations that commence on or after January 1, 2009, but may voluntarily comply before then.