As it is proxy season for calendar year companies, many of which are filing preliminary proxy statements that are subject to screening by the SEC Staff, I thought it might be helpful to publish answers to a few common questions about this process.
Is preliminary proxy screening different from other filings?
Yes, in my experience the screening process for preliminary proxies is a little different than the process for a review of registered transactions. For registration statements, the Staff will call you at some point with a screening decision because in most cases they will need to take the filing effective, which requires more interaction between you and the Staff (i.e., acceleration request, etc.) In comparison, if you file a preliminary proxy and you have not heard from the Staff within 10 calendar days from the date of your filing, you are free to file the definitive proxy, print and mail at that point—you don’t have to call the Staff to confirm that they are not going to review the filing.
How should I calculate the 10-day waiting period?
Rule 14a-6(a) states that a preliminary proxy statement must be filed at least 10 calendar days prior to the filing of a definitive proxy statement. The day count starts on the day of filing. For example, if the company filed the preliminary proxy on April 1, then day 10 would be April 10. If Staff did not notify the company by April 10 that it is being reviewed, then the company is FREE to print and mail on day 11. (As a side note, in lieu of saying the filing is being screened as a full review or monitor, the Staff may just say that they recommend the company NOT print and mail. This means the filing has been screened for some level of review internally.) **If interested in working the calendar in your favor, filing on a Friday compresses the 10-day period because four of those 10 days are weekend days. This means that the Staff will need to make a decision by the end of the following Friday.
What is the timing of a review?
In general, if the preliminary proxy statement is screened for a review, the timing for receiving comments from the Staff is roughly 27-30 days from the date of filing (similar to registration statements), although depending on the issues and type of meeting involved (annual meeting versus special meeting) the Staff may be quicker to issue a letter. Also, note that not all comments are issued in letter form—sometimes if the issue was straightforward, it is not uncommon for the Staff to issue an oral comment and tell the company to include the disclosure in the definitive proxy statement when filed.
Are there exceptions to the usual screening procedures?
Yes, generally speaking, proxy contests (including contested merger proxies) are always reviewed by Corp Fin’s Office of Mergers and Acquisitions and sometimes co-reviewed with the registrant’s assigned Assistant Director office in Corp Fin. A preliminary proxy filed in connection with a going private transaction (Schedule 13E-3) is also an exception to the general screening procedures. A regular merger proxy (not contested or going private) is treated the same as other preliminary proxies. **I note these procedures may change from time to time depending on Staff workload and priorities.**
What is a common issue that is commented on by the Staff in preliminary proxies for annual meetings?
Preliminary proxies are often filed in connection with a proposal to increase the authorized shares or a reverse split. Normally, the Staff looks for a representation in the document that the company has no current plans to use the shares. If there are current plans, they need to be discussed and the Staff will look for Note A (to Schedule 14A) issues.