On November 7, the Securities and Exchange Commission’s Division of Corporation Finance issued Staff Legal Bulletin No. 14D (CF) providing information for companies and shareholders regarding Rule 14a-8 of the Securities Exchange Act of 1934. The bulletin discusses the following:
- A company may omit a shareholder proposal recommending, requesting or requiring the board of directors to amend the company’s charter pursuant to Rule 14a-(8)(i)(1), Rule 14a-(8)(i)(2) or Rule 14a-8(i)(6) of the Exchange Act if the company can establish that applicable state law requires any such amendment to be initiated by the board of directors and then approved by shareholders in order for the charter to be amended as a matter of law. However, a company could not omit such proposal pursuant to Rule 14a-(8)(i)(1), Rule 14a-(8)(i)(2) or Rule 14a-8(i)(6) of the Exchange Act if such proposal instead recommended or requested that the board of directors “take the steps necessary” to amend the company’s charter.
- Companies and shareholder proponents can email no-action requests and correspondence related to Rule 14a-8 of the Exchange Act to the SEC at firstname.lastname@example.org.
- A company can exclude a shareholder’s proposal by sending a notice of defect to such shareholder proponent if the company’s records indicate that the shareholder proponent has not owned the minimum amount of securities for the required period of time as set forth in Rule 14a-8(b) of the Exchange Act. However, because shareholders can also hold company securities through a broker or bank, in a situation where company records indicate that the shareholder proponent does not satisfy the ownership eligibility requirements in Rule 14a-8(b) of the Exchange Act, the company must first inform the shareholder proponent that the shareholder proponent must provide proof of ownership that satisfies the requirements of Rule 14a-8(b) of the Exchange Act.
- Shareholders who submit proposals pursuant to Rule 14a-8 of the Exchange Act must provide the company with a copy of any correspondence submitted in response to the company’s no-action request in accordance with Rule 14a-8(k) of the Exchange Act. Additionally, pursuant to G.9 of Staff Legal Bulletin No. 14, both the company and the shareholder proponent should promptly forward to each other copies of all correspondence provided to the SEC in connection with Rule 14a-8 no action requests.
The Division of Corporation Finance notes that additional guidance may be obtained from Staff Legal Bulletin No. 14, Staff Legal Bulletin No. 14A, Staff Legal Bulletin No. 14B and Staff Legal Bulletin No. 14C .