Over the past two proxy seasons, the Notice and Access method of providing stockholders with proxy materials has been optional. A number of clients have elected to use this method and have generally been pleased with the results, especially with the cost savings related to printing of proxy materials. It is important to note, however, that companies who have used this method have seen a decrease in voter response, particularly from retail investors.
Effective January 1, 2009, all filers must comply with the Notice and Access model for their proxy materials. Below is an outline of the three primary options under the new Notice and Access rules. If you have questions regarding your plan for the upcoming proxy season, please consult any of the attorneys listed on this Alert.
Option 1: Full Set Delivery (the “Status Quo” or “Minimum Obligation”)
The company must print and mail proxy materials to all stockholders, using the same timetable it has used in the past. In addition, there are two new requirements. The company must:
- post proxy materials on an internet website (other than EDGAR). The website must protect the anonymity of the stockholder, and cookies or tracking mechanisms are not allowed. The website containing the proxy materials can be the issuer’s website or may be set up and maintained by a vendor. Proxy materials must be readable, printable and searchable.
- provide the information required in the “Notice of Internet Availability of Proxy Materials” in the company’s mailed proxy materials or in a separate notice that would accompany the full set of materials that includes the same information, including all required language and the exact URL, where proxy materials are available online.
Option 2: Notice Only Option
The company creates and files the “Notice of Internet Availability of Proxy Materials” with the SEC at least 40 calendar days before the annual meeting date. This means finalizing and signing off on proxy materials approximately 45-47 days prior to the annual meeting date to allow sufficient time for preparation, printing and sending the Notice. The Notice must be filed with the SEC no later than the date the company first sends the Notice to its stockholders. The electronic platform must also be live and ready at that time.
The Notice must be personalized and unique to each stockholder and must contain certain required language. The purpose of the Notice is to alert stockholders that proxy materials are available and to explain how to access those materials. No marketing materials or a proxy card may be included – just the Notice. Ten days after sending the initial Notice, a company may send a second notice with a proxy card and return envelope and post additional materials on the website or file additional materials with the SEC.
A company must send paper copies of its proxy materials to stockholders upon request, free of charge, via first class mail within three days of receipt of a request. The company may include a proxy card and a business return envelope with the paper proxy materials. Proxy materials must remain available on the website until the conclusion of the annual meeting.
Option 3: Hybrid Option
Companies can also choose to use a combination of Options 1 and 2. Not all stockholders have to be treated the same under the new proxy rules. However, if a company selects the Notice Only option for any shareholder, the 40-day deadline applies.
Key Considerations When Determining a Notice and Access Approach
- What does the company’s stockholder base look like?
- Is the company only including routine proposals?
- Does the company anticipate a proxy contest or have a controversial proposal on the ballot where a larger turnout is wanted or needed?
- Will the company host its own site or use a vendor to maintain the proxy materials devoted website?
- The choice of model is not permanent – companies can switch from one model or combination to another.