On Oct. 26, 2016, the SEC proposed amendments to the proxy rules that will require parties in a contested director election to use universal proxy cards that include the names of all Board nominees. Under current Rule 14a-4(d), one party may not include the other party’s nominees on its proxy card unless the other party’s nominees consent to be named in its proxy statement. Since such consent is rarely provided, shareholders are limited to voting on the slates of nominees chosen by the soliciting parties.

The proposal would give shareholders the ability to vote by proxy for their preferred combination of board candidates nominated by management and dissident shareholders similar to a vote in person. Universal proxy cards would be required in all non-exempt solicitations in contested elections other than those involving foreign private issuers, registered investment companies, and business development companies.

Specifically, the proposed rules would require management and each other proxy contestant to provide each other party with notice of the names of their director nominees:

  • with respect to the dissident nominees, no later than 60 calendar days prior to the anniversary of the previous year’s annual meeting date, and
  • with respect to the company nominees, no later than 50 calendar days prior to the anniversary of the previous year’s annual meeting date.

Proxy contestants would be required to refer shareholders to the other party’s proxy statement for information about that party’s nominees and explain that shareholders can access the other party’s proxy statement for free on the SEC’s website. In order to use the universal ballot, dissidents would be required to:

  • solicit shareholders representing at least a majority of the voting shares entitled to vote on the election of directors, and
  • file their definitive proxy statement with the SEC by the later of 25 calendar days prior to the meeting date or five calendar days after the company files its definitive proxy statement.

Universal proxy cards would be subject to presentation and formatting requirements to help ensure that universal proxy cards clearly and fairly present information.

Comments on the proposed amendments must be submitted to the SEC on or before 60 days after the publication of the proposals in the Federal Register.