The Business Roundtable and the U.S. Chamber of Commerce (the Petitioners) filed a petition on September 29, 2010, with the U.S. Court of Appeals for the District of Columbia Circuit seeking review of recent changes to the proxy rules adopted by the Securities and Exchange Commission (the Commission). These rule changes, including newly adopted Rule 14a-11 and amended Rule 14a-8, would enable certain shareholders or shareholder groups to have included in a company’s proxy materials: (i) shareholder nominees for director and (ii) shareholder proposals to amend provisions of a company’s governing documents regarding the procedures for shareholders to nominate directors. The same day, the Petitioners also filed with the Commission a motion to stay Rule 14a- 11, including the November 15, 2010, effective date of the rules, pending judicial review.
On October 4, 2010, the Commission granted a stay of Rule 14a-11 and Rule 14a-8 and the related rule changes, pending resolution by the Court of Appeals. The Commission did not address in its order granting the stay the merits of the Petitioners’ challenge to the rules. The Commission did note in its order that “a stay avoids potentially unnecessary costs, regulatory uncertainty, and disruption that could occur if the rules were to become effective during the pendency of a challenge to their validity.” The Commission and the Petitioners will seek expedited judicial review. As a result, the Commission expects that questions about the validity of the rules will be resolved as quickly as possible. Until more information is available about the timeframe for review, however, the timeframe for implementation of Rule 14a-11 and Rule 14a-8 and the related proxy access rule changes remains uncertain. At a minimum, resolution of the petition by the Court of Appeals likely will take several months.