As we enter the 2026 proxy season, we are providing our annual memorandum to callyour attention to certain matters of Maryland law, some new and some continuing, relating toproxy materials and annual meetings about which we often receive questions. Because the sameprinciples generally apply both to corporations formed under the Maryland General CorporationLaw (the “MGCL”) and to real estate investment trusts formed under the Maryland REIT Law(the “MRL”), we refer hereafter, unless otherwise noted, only to corporations (or sometimescompanies). As in prior years, we are available to review draft proxy statements and otherannual meeting materials (e.g., sign-in and remote communication procedures and scripts) forMaryland law compliance.
750 E. PRATT STREET SUITE 900 BALTIMORE, MD 21202T 410.244.7400 F 410.244.7742 www.Venable.comFebruary 2, 2026Proxy Materials and Annual Meetings under Maryland Law - 2026 As we enter the 2026 proxy season, we are providing our annual memorandum to callyour attention to certain matters of Maryland law, some new and some continuing, relating toproxy materials and annual meetings about which we often receive questions. Because the sameprinciples generally apply both to corporations formed under the Maryland General CorporationLaw (the “MGCL”) and to real estate investment trusts formed under the Maryland REIT Law(the “MRL”), we refer hereafter, unless otherwise noted, only to corporations (or sometimescompanies). As in prior years, we are available to review draft proxy statements and otherannual meeting materials (e.g., sign-in and remote communication procedures and scripts) forMaryland law compliance.Key Issues for the 2026 Proxy Season.Rule 14a-8 Proposals. Recently, the Division of Corporation Finance of the Securitiesand Exchange Commission (the “SEC”) issued a statement that it would stop responding to Rule14a-8 no-action requests for the 2025-2026 proxy season and would “express no views” on mostbases for exclusion of stockholder proposals under Proxy Rule 14a-8, except requests under Rule14a-8(i)(1) (the “improper under state law / jurisdictional” ground). Companies that intend toexclude stockholder proposals from their proxy materials must still notify the SEC andproponents no later than 80 calendar days before filing a definitive proxy statement. In addition,if a company wishes to receive a response for any proposal that it intends to exclude pursuant toRule 14a-8, other than requests to exclude proposals that are improper under applicable state law,the company or its counsel must include, as part of its notification to the SEC, an “unqualifiedrepresentation that the company has a reasonable basis to exclude the proposal based on theprovisions of Rule 14a-8, prior published guidance, and/or judicial decisions.” Excluding aprecatory proposal on the basis that it is improper under state law still requires a supportingopinion of counsel that the proposal is not proper under state law. To date, we are not aware ofany precatory proposals that have been excluded during the 2025-2026 proxy season on thisbasis.Retail Voting Program. In 2025, the Division of Corporation Finance confirmed that itwould not recommend enforcement action with respect to Exxon Mobil Corporation’simplementation of its “Retail Voting Program.” Exxon’s Retail Voting Program allows all retailinvestors to grant standing instructions to vote their shares in line with the recommendation ofthe board of directors on either (1) all matters or (2) all matters except contested directorelections or any acquisition, merger or divestiture transaction that, under applicable state law orstock exchange rules, requires approval of stockholders. Retail investors are permitted to opt into the Retail Voting Program at no cost and may freely opt out at any time. Retail investors mayoverride their standing voting instructions by voting as specified in the proxy materials for astockholders meeting. Exxon, in its No-Action Request Letter, drew attention to the fact thatNew Jersey (Exxon’s state of incorporation) and Delaware state corporate law each permit-2-stockholders to give standing voting instructions that do not expire so long as the instructionsspecifically state as much. The MGCL provides the same flexibility with respect to the durationof a proxy. Under Section 2-507(b)(2) of the MGCL, a proxy may remain valid for longer than11 months if the proxy specifies such extended duration in its terms. While the Retail VotingProgram has not yet been widely adopted and is currently subject to litigation, Maryland publiccompanies, particularly those struggling with voter turnout, achieving a quorum or lowengagement from retail stockholders generally, should continue to monitor developments andconsider the implementation of a Retail Voting Program. To date, the Division of InvestmentManagement has not issued comparable relief for investment company proxy solicitations, whereit would be particularly useful, given the generally low shareholder participation in suchsolicitations.Advance Notice Bylaws/Contested Meeting. In a recent ruling, the United States DistrictCourt for the District of Maryland upheld Braemar Hotels & Resorts Inc.’s decision to reject astockholder’s nomination notice that was received months past the publicly announced deadline,even after the annual meeting was delayed, consistent with the clear language of the bylaws thatprovided that postponement of an annual meeting does not reopen the nomination window.Ruling from the bench, Judge Gallagher also rejected the plaintiff-stockholder’s argument thatBraemar’s rejection of the stockholder’s nominees violated Proxy Rules (as defined below) 14a19, 14a-3, and 14a-9. In this regard, the court recognized that there was no “contested election,”since the plaintiff-stockholder had not filed a proxy statement or solicited proxies and cited SECguidance that a company was not required to include a dissident stockholder’s nominees on itsproxy card when the company determines that the nominations did not comply with advancenotice bylaw requirements. Finally, the court rejected the plaintiff-stockholder’s argument thatBraemar’s directors breached their duties in failing to consider the stockholder’s nominees,finding that there is no evidence that the Board engaged in fraud or bad faith, which is requiredin order to overcome the business judgment rule.The Annual Meeting Requirement. The MGCL requires each corporation to “hold anannual meeting of its stockholders to elect directors . . .” at “the time or in the manner” provided inthe corporation’s bylaws.1 The MGCL provides an exception to this annual meeting requirement fora corporation that is an investment company as defined in the Investment Company Act of 1940, asamended (the “1940 Act”).2 While there is no annual meeting counterpart in the MRL, in ourexperience, most declarations of trust and/or bylaws for real estate investment trusts mandate theholding of an annual meeting of shareholders. In addition, both the New York Stock Exchange(“NYSE”) and the Nasdaq Stock Market require listed companies to hold an annual meeting eachfiscal year.1 Under the MGCL, the failure to hold an annual meeting does not invalidate the corporation’s existence oraffect any otherwise valid corporate act.2 The MGCL was amended in 2023 to make the investment company exception applicable to closed-endfunds that elect to be regulated as business development companies (“BDCs”) under the 1940 Act. Unlisted BDCshave the same flexibility with respect to annual meetings of stockholders as registered investment companies.-3-Notice of the Meeting. The MGCL requires the secretary of the corporation to give noticeof the meeting in writing or by electronic transmission not less than ten nor more than 90 days beforethe meeting to each stockholder entitled to vote at the meeting and to each other stockholder entitledto notice of the meeting. Typically, only stockholders entitled to vote at a meeting are entitled tonotice and to attend the meeting.3 The notice for an annual meeting must state the time of themeeting, the place of the meeting, if any, and the means of remote communication, if any, bywhich stockholders and proxy holders may be deemed to be present and entitled to vote at themeeting.
Quorum and Presence at the Meeting. Under the MGCL, unless the charter providesotherwise, the presence, in person or by proxy, of the holders of shares entitled to cast a majorityof all the votes entitled to be cast constitutes a quorum for a meeting of stockholders. In theabsence of a contrary charter provision, the MGCL permits the bylaws of a registered open-endinvestment company and a corporation having a class of equity securities registered under theExchange Act and at least three independent directors to lower the quorum requirement to notless than one-third of the votes entitled to be cast at the meeting.A stockholder that is physically present at the convening of a meeting (including astockholder that has signed in and leaves after the determination of the presence of a quorum) is“present” for purposes of determining the existence of a quorum, whether or not the stockholdervotes. The same rule applies to a stockholder that is present “by proxy.” Thus, if a stockholderreturns a properly executed proxy or otherwise authorizes a proxy (and the proxy holder attendsthe meeting or properly submits the proxy), the holder of the shares should be counted as present“by proxy,” whether the holder votes on all matters, only on some matters or on no matters at allor affirmatively checks the box marked “withhold authority” as to directors or “abstain” as toone or more other matters.Vote Requirements, Abstentions and Broker Non-Votes. The MGCL addresses voterequirements at meetings of stockholders but, like most corporation statutes, does not specificallyaddress abstentions and broker non-votes.Vote Requirements. With limited exceptions,4 there are four vote requirements in theMGCL, depending on the matter for which the vote is taken:3 There may be certain situations (e.g., certain types of charter amendments or other extraordinary actions)for which (a) the MGCL requires notice to non-voting stockholders or (b) the charter of the corporation providesvoting rights (or rights to notice) to otherwise non-voting stockholders. Best practice is always to check the charter(including articles supplementary) for voting rights of holders of various classes or series of stock.4 The four exceptions are (a) the special voting requirements under the Maryland Business CombinationAct for certain business combinations with interested stockholders, (b) approval of voting rights under the MarylandControl Share Acquisition Act for holders of control shares acquired in a control share acquisition, (c) the vote toremove a director for companies that have made an election to be subject to MGCL §3-804 and (d) separate classvoting.-4-(a) Election of directors - Plurality of all the votes cast at a meeting at whicha quorum is present. No counterpart in the MRL.(b) Removal of a director - Majority of all the votes entitled to be cast for theelection of directors. The MRL contains a counterpart for the removal of a trustee.(c) Charter amendment; merger; transfer of all or substantially all of theassets; consolidation; statutory share exchange; conversion; and dissolution - Two-thirdsof all the votes entitled to be cast on the matter. The MRL contains a counterpart for anamendment of the declaration of trust, merger and conversion, but not for a transfer ofassets, consolidation, statutory share exchange or dissolution.5(d) All other matters - Majority of all the votes cast at a meeting at which aquorum is present. No counterpart in the MRL. In each of the foregoing situations, the vote required may be altered by provision in thecharter or, in the case of the plurality vote requirement for the election of directors, in thebylaws. In the absence of a counterpart provision in the MRL, the provisions of the declarationof trust or the bylaws will determine the vote required. Furthermore, the board may choose tosubmit a proposal to the shareholders conditioned on approval (a) by a percentage greater thanthat required by the MGCL or the MRL or (b) by some group of shareholders, such as a“majority-of-the-minority provision” in connection with a merger with a controlling shareholder.In addition, other laws or rules may impose different vote requirements. Item 21(a) ofSchedule 14A under Regulation 14A (the “Proxy Rules”) of the Securities Exchange Act of1934, as amended, requires the proxy statement to disclose the votes required for the election ofdirectors and for the approval of any other matter (except, inexplicably, approval of auditors).Abstentions. An “abstention” is a shareholder’s affirmative choice to decline to vote on aproposal. An abstention requires more than simply not voting; the shareholder must undertakesome affirmative act, such as marking “abstain” on a ballot, proxy card or voting instructionform (“VIF”), to indicate the holder’s decision to refrain from voting. An abstention is alwayscounted as present and entitled to vote because presence (either in person or by proxy) andentitlement to vote are necessary to the act of abstaining. With respect to the counting of votes,as noted above an abstention is not a vote cast. See Larkin v. Baltimore Bancorp, 769 F. Supp.919 (D. Md. 1991), aff’d, 948 F.2d 1281 (4th Cir. 1991). If the vote required is either a plurality, majority or other percentage of the votes cast, anabstention will have no effect because it will not be a vote cast. If the vote required is a majority,two-thirds or other percentage of all the votes entitled to be cast, the effect of an abstention will5 Note that the MGCL treats registered open-end investment companies as a special case and generallyrequires approval of charter amendments and extraordinary actions in the manner and by the vote required under the1940 Act. Accordingly, these actions may be taken with Board approval and without stockholder approval, exceptwhere the vote of security holders is required by the 1940 Act.
-5-be the same as a vote against the proposal because a fixed percentage of affirmative votes isrequired.Broker Non-Votes. Many shares of public companies are held in “street” or nomineename in accounts with banks and broker-dealers. These banks and broker-dealers typically hold“their” shares, i.e., the shares in their customers’ accounts, through The Depository TrustCompany (registered in the name of its nominee, Cede & Co.), and their customers are thereforegenerally referred to as “beneficial owners.” The banks and brokers are generally required underthe Proxy Rules to forward proxy materials to the beneficial owners and to seek instructions withrespect to the voting of those securities. Under Rule 452 of the NYSE, brokers are not permittedto vote on the election of directors without instructions.6 Section 402.08(B) of the NYSE ListedCompany Manual also lists many matters as to which a broker member may not vote or give aproxy without instructions from the beneficial owner. As a result, there are very few proposalsas to which a broker may exercise its own discretionary authority in voting customer shares.While neither the SEC nor Rule 452 defines “broker non-vote,” it is generally acceptedthat a broker non-vote is a vote that is not cast on a non-routine matter by a broker that is present(in person or by proxy) at a meeting at which there is at least one routine matter on the proxycard (otherwise the broker does not have authority to vote on anything and does not ordinarilysend in a proxy) because (a) the shares entitled to be voted are held in street name, (b) the brokerlacks discretionary authority to vote the shares and (c) the broker has not received votinginstructions from the beneficial owner.7 If the broker votes on a routine matter8 but does notvote on a non-routine item on the proxy, then the shares held in street name are present forquorum purposes and the effect of not voting on the non-routine matter depends upon whetherthe vote requirement for that proposal is based upon a proportion of the votes cast (no effect) or aproportion of the votes entitled to be cast (effect of a vote against).9 If the only matter at a6 This rule does not apply to director elections for investment companies registered under the 1940 Act.However, closed-end investment companies that elect to be regulated as BDCs under the 1940 Act are not includedin this exception.7 Generally, the distribution and collection of VIFs are handled by Broadridge Financial Solutions, Inc.,acting on the brokers’ behalf pursuant to contract.8 Brokers generally vote their entire record date position on routine matters, reflecting (a) a combination ofclient voting instructions received and (b) discretionary votes according to Rule 452 of the NYSE where votinginstructions were not received.9 An SEC no-action letter issued to the American Bar Association in 1993 takes the position that for Rule16b-3(d) purposes “broker non-votes should not be considered shares entitled to vote because the broker and proxyholder do not have the authority to vote the shares with regard to the plan.” American Bar Ass’n, SEC No-ActionLetter, 1993 SEC No-Act. LEXIS 782 (June 24, 1993). A different result might be reached under state corporationlaw. For example, similar language in the MGCL (e.g., “votes entitled to be cast on the matter,” see MGCL §2-604(f) (regarding charter amendments)) means the total votes to which the total outstanding shares are entitled.Compare Berlin v. Emerald Partners, 552 A.2d 482, 493 (Del. 1988) (holding that “[a] stockholder who is presentin person or represented at a meeting by a general proxy, is present for quorum purposes and is also voting powerpresent on all matters. However, if the stockholder is represented by a limited proxy and does not empower itsholder to vote on a particular proposal, then the shares represented by that proxy cannot be considered as part of the-6-meeting is non-routine (as may often occur in connection with a special meeting), there shouldbe no broker non-votes because a broker will not submit a vote without client instructions, asthere is nothing on which the broker is permitted to vote (and the shares are not present forquorum purposes).10 In such a circumstance, the shares held in street name for which votinginstructions have not been received and are not represented by a proxy at the meeting should betreated identically to shares held by a record holder that chooses not to appear at the meeting inperson or by proxy, i.e., as unvoted shares not present at the meeting.11
Item 21(b) of the Proxy Rules requires disclosure only of “the method by which voteswill be counted, including the treatment and effect under applicable state law and registrantcharter and bylaw provisions of abstentions, broker non-votes, and, to the extent applicable, asecurity holder’s withholding of authority to vote for a nominee in an election of directors.”Considering the requirements of the federal securities laws, Maryland law and the NYSE,we recommend for Maryland corporations and real estate investment trusts the forms ofdisclosure set forth on Appendix A hereto, which may be varied appropriately in accordancewith the proposal and the applicable vote requirement. The bracketed language on quorums inAppendix A is not required by Item 21(b), but is often disclosed anyway.12 Proxy Cards. The proxy card is the critical document under state law by which mostvotes by stockholders of record are generally authorized to be cast. In this regard, it is importantto note that “stockholder” is defined by the MGCL as “a person who is a record holder of sharesof stock in a corporation . . . .”13 Under the MGCL, the proxy must be written and signed by thevoting power present with respect to that proposal.”). We disagree with the SEC’s position because broker nonvotes are not, to use the SEC’s word, “shares” and do not implicate the underlying voting rights to which all sharesof that class are entitled under applicable state law and the charter; rather, broker non-votes are the absence of theright of a particular person, the broker, to vote the shares on a particular matter without instruction from thebeneficial owner. In other words, the shares remain entitled to vote, but the particular holder of the shares at thattime, the broker, is not entitled to vote them. See generally CORP. LAWS COMM. & CORP. GOVERNANCE COMM.,BUS. LAW SECTION, HANDBOOK FOR THE CONDUCT OF SHAREHOLDERS’ MEETINGS, Chapter 11 (A.B.A. 3d ed.2021).10 JAMES J. HANKS, JR., MARYLAND CORPORATION LAW §8.03B n.37 (2d ed. 2020, Supp. 2025).11 On the other hand, there is nothing under Maryland law preventing a broker from submitting a proxyrepresenting shares for which voting instructions have not been received for a meeting with no routine matter on theagenda. Such uninstructed shares would be present for purposes of establishing a quorum (the only reason to submitthe proxy) but would not be “broker non-votes” as that term is customarily applied.12 The foregoing discussion of shareholder voting and the treatment of abstentions and broker non-votesapplies equally to statutory trusts formed under the Maryland Statutory Trust Act, absent an express provision to thecontrary in the governing instrument of the trust. The governing instrument of a statutory trust typically definesshareholder voting rights and the thresholds for shareholder approvals but does not expressly address the treatmentof abstentions and broker non-votes at meetings of shareholders.13 MRL §8-101(e) includes a correlative definition for a “shareholder” under the MRL. In thismemorandum, we have generally used “shareholder” to refer both to a stockholder of a Maryland corporation and to-7-stockholder of record or by the record stockholder’s authorized agent. Under the MGCL, signingmay be by (a) actual signature by the stockholder or the stockholder’s authorized agent or (b) thestockholder or the stockholder’s authorized agent causing the stockholder’s signature to beaffixed to the writing by any reasonable means, including facsimile signatures. Note that theMGCL does not expressly apply to the VIFs sent by or on behalf of brokers or otherintermediaries to obtain voting instructions from beneficial owners holding shares in street name.Among the requirements of Proxy Rule 14a-4(a) and (b), the proxy card must state inboldface type who is soliciting the proxies, list the names of nominees for election as directorsand enable the shareholder to withhold authority to vote for individual nominees. Proxy Rule14a-4(b)(3) also requires that if the proxy card provides a means for the shareholder to vote forall nominees as a group, then it must also provide a means to withhold authority to vote for thegroup (or against such group of nominees and a means to abstain from voting for such group ofnominees).Rule 14a-19 under the Proxy Rules requires “universal” proxy cards in contested directorelections for many public companies. The SEC has provided guidance on the treatment of proxycards marked with more or fewer nominees than there are director seats up for election, as wellas signed but unmarked proxy cards:(a) Overvoting: If a stockholder returns a card that marks more nomineesthan there are director seats up for election, the company must disregard all votes on thatcard with respect to the director election (and cannot use discretionary voting by theproxy holder for director elections). The company must accept the votes for all otherproposals (and thus the card would count toward a quorum).14(b) Undervoting: If a stockholder returns a card that marks fewer nomineesthan there are director seats up for election, the company must count the votes as marked(and the proxy holder cannot use discretionary authority to “fill out” the remainder of thevotes).15(c) No Votes: If a stockholder returns a card that marks no nominees, theproxy holder may vote that item in his or her discretion, provided that the proxy cardstates in bold how the proxy holder will vote where no choice is specified.16a shareholder of a Maryland real estate investment trust, except when referring to a stockholder under a specificprovision of the MGCL.14 Compliance and Disclosure Interpretation (“C&DI”) Question 139.07.15 C&DI Question 139.08.16 C&DI Question 139.09.-8-Electronic Voting. In recognition of the fact that companies often hire proxy solicitorsand other intermediaries to assist in soliciting proxies, the MGCL permits a stockholder not onlyto authorize another person to act as a proxy but also to authorize an intermediary, e.g., a proxysolicitor, to authorize another person to act as a proxy. Either of these authorizations may bedone “by a telegram, cablegram, datagram, electronic mail, or any other electronic or telephonicmeans.” In other words, a stockholder may effectively cast votes by authorizing via telephone orinternet, even though the MGCL does not expressly permit direct voting by telephone or otherelectronic means. As is well known, many proxy solicitors solicit votes by these means.17Virtual Meetings. During the COVID-19 pandemic, many Maryland corporationstransitioned to holding virtual-only stockholders' meetings, and we expect that virtualstockholder meetings will continue to be far more common than before the pandemic. UnderMGCL §2-503(b), which also applies to real estate investment trusts under the MRL, the boardof directors of a Maryland corporation, if it is authorized to determine the place of a meeting ofstockholders (as is the case with most boards), “may determine that the meeting not be held atany place, but instead may be held partially or solely by means of remote communication . . . .”Under the MGCL, subject to any guidelines or procedures adopted by the board ofdirectors, stockholders and proxy holders virtually attending a meeting of stockholders may (a)participate in the meeting and (b) be considered present in person and vote at the meeting. For astockholder or proxy holder to be considered present and vote at a virtual meeting (a) thecorporation must implement reasonable measures to (i) verify that each person consideredpresent and authorized to vote at the meeting by means of remote communication is astockholder or proxy holder and (ii) provide the stockholders and proxy holders a reasonableopportunity to participate in the meeting and to vote on matters submitted to the stockholders,including an opportunity to read or hear the proceedings of the meeting substantiallyconcurrently with the proceedings, and (b) in the event any stockholder or proxy holder votes ortakes other action at the meeting, a record of the vote or other action must be maintained by thecorporation. Some service providers offering platforms for holding virtual meetings provide anoption to record the proceedings of annual meetings of stockholders. Before recording orpublishing any recording of an annual meeting of stockholders, a company should considerapplicable laws governing the recording of communications generally.
Internet Availability of Proxy Materials. Under the Proxy Rules, all filers are required topost their proxy materials on a publicly accessible internet website (other than EDGAR) and maychoose to (a) utilize the “notice and access” model for furnishing proxy materials to shareholdersby sending a Notice of Internet Availability of Proxy Materials complying with Proxy Rule 14a16 (the “Proxy Rule Notice”) or (b) deliver a full set of paper copies of the proxy materials,including the Proxy Rule Notice. A Maryland corporation may combine the notice of a meetingof stockholders required by the MGCL with the Proxy Rule Notice.17 Note that, irrespective of the method of proxy authorization, no votes are formally cast until the proxyholder submits a completed ballot at the meeting of stockholders.-9- Householding. Proxy Rule 14a-3(e) provides that an annual report, proxy statement orProxy Rule Notice will be considered to have been delivered to all shareholders of record thatshare an address so long as one annual report, proxy statement or Proxy Rule Notice, asapplicable, is delivered to the shared address and is addressed to (a) the shareholders as a group,(b) each of the shareholders individually or (c) the shareholders in a form to which each of themhas consented in writing. The Proxy Rules also require compliance with certain other conditionsregarding express or implied consents by shareholders. Although the MGCL does not address delivery of annual reports or proxy statements, itdoes address the manner in which a corporation may give notice of a meeting of stockholders byproviding for four types of notice: personal delivery, delivery to the stockholder’s residence orplace of business, mailing to the stockholder at the stockholder’s address as shown on the recordsof the corporation and electronic transmission. Under the MGCL, a single notice is effective as to all stockholders sharing an addressunless the corporation receives a written or electronic request from a stockholder at such addressthat a single notice not be given. In lieu of householding, we believe that the only means ofdelivery permissible under the MGCL is addressing the material to each stockholder“individually” at the shared physical or electronic address. The corporation may deliver thesematerials in one package if it lists the name of each stockholder-recipient on the label containingthe shared address. Additionally, the corporation must include a separate proxy card for eachindividual stockholder at the shared address. The MRL does not state the permissible methods ofdelivery of notice to the shareholders, and this is customarily addressed by provision in thedeclaration of trust or bylaws.Ratification of Auditors. Although quite common, ratification of the board’sappointment of auditors is not generally required under federal or Maryland law. As ratificationof auditors is a routine matter under the NYSE rules, brokers are entitled to vote on it withoutinstructions from beneficial owners. Thus, if there is no other routine matter on the proxy card,inclusion of ratification of auditors on the card may assist in obtaining a quorum for the meeting. Board Structure and Director Nominations. Item 7 of the Proxy Rules sets forth variousrequirements with respect to disclosure of the composition of the board and the directornomination process. The proxy statement must include (a) a discussion of the “specificexperience, qualifications, attributes or skills that led to the conclusion that the [nominee orincumbent director] should serve as a director”; (b) a discussion of the leadership structure of theboard, including, among other things, disclosure of why the board has determined that itsleadership structure is appropriate and the role of the board in risk oversight; (c) the role ofcompensation consultants and any potential conflicts of interest; and (d) whether the board ornominating committee considers diversity in identifying board nominees, whether the board ornominating committee has a diversity policy and, if so, how it is implemented and itseffectiveness assessed. In this regard, there are three important issues under Maryland law:First, any policy and/or procedures relating to the consideration of shareholderrecommended candidates for director, and any specific minimum qualifications for-10-recommendation by the nominating committee for election as a director, should bedrafted, adopted, disclosed and applied in careful coordination with any existingprovisions in the charter or bylaws relating to qualifications for election (e.g., minimumor maximum age or ownership of company stock) and procedures for nomination (e.g.,advance notice to the company) and with any corporate governance guidelines. With theproliferation of policies, processes, committee charters, guidelines and principles - inaddition to corporate charters and bylaws - it is important that the provisions of all thesedocuments not conflict with each other in either letter or spirit. This also applies to otherrequirements and duties, such as those involving composition of the audit andcompensation committees.Second, the MGCL permits a director “to rely on any information, opinion, report,or statement . . . prepared or presented by” an officer, employee, lawyer, accountant,other expert or board committee on which the director does not serve if the directorreasonably believes that, as the case may be, (a) the officer or employee is reliable andcompetent, (b) the expert is acting within her or his professional or expert competence or(c) the committee merits confidence. Thus, the availability and presentation ofinformation and advice can be an important element in a director’s substantiveperformance and in protecting him or her from liability. However, directors should guardagainst over-reliance, especially in the current corporate governance environment.Appropriate reliance can be an important aid to - but is not a substitute for - the properexercise of business judgment. The MGCL states that the board’s delegation of authorityto a committee does not relieve the directors who are not members of the committee oftheir duties under the MGCL.Finally, the additional disclosure requirements, including the need to continuouslyevaluate the qualifications of all directors for service as directors, highlight theimportance of an annual board and board committee self-evaluation (required by theNYSE) in which each director actively participates. Although Nasdaq does not have asimilar requirement, many Nasdaq-listed companies have adopted board evaluationprocesses as a matter of good corporate governance. We regularly assist clients in thedesign and conduct of board evaluations. For additional information on the boardevaluations, please see our Venable Maryland Law memorandum, Annual Board SelfEvaluations: A Valuable Aid to Board Effectiveness.Committees. Item 7(b) of the Proxy Rules and the rules enacted under the SarbanesOxley Act of 2002 and by the stock exchanges require various disclosures in the proxy statementconcerning the audit, compensation and nominating/corporate governance committees, theircharters and their members. Item 7(b) currently requires a public company to include thesecommittees’ charters as appendices to its annual meeting proxy statement at least every threefiscal years, if the charters are not available to shareholders on the company’s website. As aresult, most public companies in our experience place these charters on their websites. Section303A of the NYSE Listed Company Manual requires the charters of the audit, nominating andcompensation committees, the corporate governance guidelines and the code of business conduct-11-and ethics to be posted on the company’s website. The company must disclose in the proxystatement that such materials are available on the website and provide its address. All committee reports included in the proxy statement should be reviewed and signed byeach member of the committee, submitted to the board and made a part of the board andcommittee records. Although not required, a committee may want to consider dating thesereports. Most importantly, each committee report should be carefully reviewed to confirm thatthe committee actually did what the report says was done and that the committee took all actionsrequired by its charter. Indemnification/Advance of Expenses in Derivative Suits. The MGCL requires aMaryland corporation to report in writing to its stockholders prior to, or with the notice of, thenext meeting of stockholders, any indemnification of or advance of expenses to a director orofficer in a suit by or on behalf of the corporation. Shareholder Proposals for Next Annual Meeting.Disclosure Deadlines under Proxy Rules. Proxy Rule 14a-5(e) requires the proxystatement to disclose, “under an appropriate caption,” (a) the deadline for submitting shareholderproposals for inclusion in the proxy statement and the proxy card for the next annual meeting,calculated as provided in Rule 14a-8(e) (Question 5), (b) the deadline for submitting notice of ashareholder proposal for consideration at the meeting, calculated as provided in Proxy Rule14a-4(c)(1), or under an “advance notice provision, if any, authorized by applicable state law,”(c) the deadline for submitting nominees for inclusion in the proxy statement and the proxy cardfor the next annual meeting pursuant to an applicable state or foreign law provision or acompany’s governing documents (e.g., a proxy access bylaw) and (d) the deadline for providingnotice of a solicitation of proxies in support of director nominees (other than the company’snominees) pursuant to Proxy Rule 14a-19 for the company’s next annual meeting ofshareholders.Inclusion in Proxy Statement and on Proxy Card. If the shareholder’s proposal issubmitted for inclusion in the proxy statement and proxy card for a regularly scheduled annualmeeting (often referred to as a “Rule 14a-8” or “precatory” proposal), then under Proxy Rule14a-8(e)(2), it must be received by the company at its principal executive office not less than 120calendar days before the first anniversary of the date of the proxy statement released toshareholders for the prior year’s annual meeting (which is interpreted by the SEC as the date thatthe proxy statement is first sent or given to security holders).Proxy Access. For companies that have adopted a proxy access bylaw, a shareholder,upon satisfying certain requirements, may require the company to include in its proxy materialsone or more shareholder nominees for director. Most proxy access provisions require ashareholder to comply with the timing and informational requirements included in advancenotice provisions in the charter or bylaws, among other requirements. In our experience, proxyaccess bylaws have not been widely utilized, and their use now seems even less likely, given theavailability of universal proxies under Proxy Rule 14a-19.-12-Universal Proxies. For contested elections, dissident shareholders must provide thecompany with notice of their intent to solicit proxies and provide names of their nominees nolater than 60 calendar days18 before the anniversary of the previous year’s annual shareholders’meeting unless an earlier time is required by the company’s organizational documents.Presentation at the Annual Meeting. A shareholder may opt not to submit a proposal forinclusion in the company’s proxy statement and proxy card but still want to present it at themeeting; or a shareholder may want to nominate an individual for election to the board. If so, theshareholder must comply with any advance notice provision in the charter or bylaws. TheMGCL (which expressly applies in this regard to real estate investment trusts under the MRL)authorizes requiring advance notice for stockholder nominations or proposals. We have a fullydeveloped form of advance notice bylaw and, if you have advance notice bylaws that have notrecently been reviewed, particularly in light of Proxy Rule 14a-19, you may want to do so nowso that any amendments may be incorporated into the bylaws (and possibly the 2026 proxystatement) for application to the 2027 annual meeting of shareholders.
Postponement and Adjournment. The MGCL expressly permits postponement of ameeting of stockholders before it is convened and adjournment of a convened meeting to a laterdate. Typically, a postponement is publicly disclosed not later than the day before the date of themeeting. The notice requirements for postponements and adjournments vary and also depend onthe duration of the postponement or adjournment. We believe (and our form of bylaws provides)that the chair of the meeting has broad power to conduct the meeting, including recessing andadjourning it, especially if this authority is specifically conferred by the bylaws.19* * * * As discussed above, it is important that the various elements relating to the governance ofthe corporation - the charter, the bylaws, board committee charters and corporate governanceguidelines and policies - be consistent with one another. A comprehensive review of thesedocuments should be a part of the preparation for each annual meeting. Additionally, in light ofthe current environment, the board should periodically review the status of the company’sdefenses against an unsolicited takeover bid. Our colleagues and we are available to discuss any questions you may have concerningMaryland law as it applies to your meeting notice, proxy statement, proxy card and the conductof your annual meeting. Jim Hanks Hirsh Ament Michael Leber Lauren Fields18 Under Proxy Rule 14a-19, where this deadline falls on a Saturday, Sunday or holiday, the deadline will be treatedas the first business day following the Saturday, Sunday or holiday. 19 “A meeting that is ‘adjourned’ is one that is brought to a close, at least until (if ever) it is reconvened; a meetingthat is ‘recessed’ is one that is halted temporarily, usually within the same day.” JAMES J. HANKS, JR., MARYLANDCORPORATION LAW §7.18 (2d ed. 2020, Supp. 2025).-13-This memorandum is provided for information purposes only and is not intended to provide legaladvice. Such advice may be provided only after engagement for advice and analysis of specificfacts and circumstances and consideration of issues that may not be addressed in this document.APPENDIX APROXY MATERIALS UNDER MARYLAND LAW - 2026N.B.: Be sure to check that the statutory vote requirements have not been altered by a provisionin the charter, declaration of trust or bylaws.Election of Directors by Plurality VoteThe vote of a plurality of all of the votes cast at a meeting at which aquorum is present is necessary for the election of a director. For purposes of theelection of directors, abstentions and broker non-votes, if any, will not be countedas votes cast and will have no effect on the result of the vote[, although they willbe considered present for the purpose of determining the presence of a quorum].Election of Directors by “Majority Voting” The vote of a majority of the total of votes cast for and against a nomineeat a meeting at which a quorum is present is necessary for the election of adirector. For purposes of the election of directors, abstentions and broker nonvotes, if any, will not be counted as votes cast and will have no effect on the resultof the vote[, although they will be considered present for the purpose ofdetermining the presence of a quorum]. [N.B.: The foregoing disclosure issuggested for the common “majority voting” requirement in uncontested electionsonly. For voting in contested elections, where the prevailing threshold is pluralityvoting, see the prior paragraph.]Approval of Extraordinary ActionThe affirmative vote of two-thirds of all of the votes entitled to be cast onthe matter is required for approval of the proposed [charter amendment, merger,etc.]. For purposes of the vote on the proposed [charter amendment, merger, etc.],abstentions and broker non-votes will have the same effect as votes against theproposal[, although they will be considered present for the purpose of determiningthe presence of a quorum].Approval of Non-Extraordinary ActionThe affirmative vote of a majority of all of the votes cast at a meeting atwhich a quorum is present is required for approval of [specify proposal]. Forpurposes of the vote on the [specify proposal], abstentions [and broker non-votes- N.B.: Include these words only if the vote is on a non-routine matter] will notbe counted as votes cast and will have no effect on the result of the vote[,although they will be considered present for the purpose of determining thepresence of a quorum].A-2Approval of Advisory Vote on the Frequencyof an Advisory Vote on Executive Compensation The option of one year, two years or three years that receives a majority ofall the votes cast at a meeting at which a quorum is present will be the frequencyfor the advisory vote on executive compensation that has been recommended byshareholders. For purposes of this advisory vote, abstentions and broker nonvotes will not be counted as votes cast and will have no effect on the result of thevote[, although they will be considered present for the purpose of determining thepresence of a quorum]. In the event that no option receives a majority of thevotes cast, we will consider the option that receives the most votes to be theoption selected by shareholders. In either case, this vote is advisory and notbinding on the Board or the Company in any way, and the Board or the CorporateGovernance Committee may determine that it is in the best interests of theCompany to hold an advisory vote on executive compensation more or lessfrequently than the option recommended by our shareholders.Approval of Transaction underSection 312.03 of the Listed Company Manual The affirmative vote of a majority of the votes cast on the proposal at ameeting at which a quorum is present is required for approval of [specifyproposal]. For purposes of the vote on [specify proposal], abstentions and brokernon-votes will not have any effect on the result of the vote. [Both abstentions andbroker non-votes will be considered present for the purpose of determining thepresence of a quorum.]Approval of SEC Rule 16b-3 Plan(Other Than a Discretionary Transaction) The affirmative vote of the holders of a majority of the shares [or othersecurities] present (or represented) and entitled to vote at the meeting is requiredfor approval of the proposed [specify name of employee benefit plan or describespecific transaction being submitted pursuant to Rule 16b-3(d)(2)]. For purposesof the vote on the proposed plan, abstentions will have the same effect as votesagainst the proposed [plan] [transaction], and broker non-votes will not becounted as shares entitled to voteA on the matter and will have no effect on theresult of the vote. [Both abstentions and broker non-votes will be consideredpresent for the purpose of determining the presence of a quorum.]A See footnote 9, above.A-3Approval by a 1940 Act Majority The approval of the proposal requires the affirmative vote of the holders ofa “majority of the outstanding voting securities” of the Fund as defined in[Section 2(a)(42) of] the Investment Company Act of 1940, which means thelesser of (i) 67% or more of the voting securities of the Fund present orrepresented at the meeting, if the holders of more than 50% of the Fund’soutstanding voting securities are present or represented by proxy, or (ii) more than50% of the outstanding voting securities of the Fund. For purposes of the vote onthe proposal, abstentions and broker non-votes will have the effect of votesagainst the proposal[, although they will be considered present for purposes ofdetermining the presence of a quorum].
