As reported in the May 22 edition of Corporate and Financial Weekly Digest, on June 10, the Securities and Exchange Commission proposed changes to the federal proxy rules to facilitate the exercise of shareholders’ rights under state corporate law to nominate and elect directors.
The SEC has this week published its release regarding these proposed changes. The SEC’s proposals provide shareholders with two ways to more effectively exercise their rights to nominate directors. First, the SEC is proposing a new proxy rule (Exchange Act Rule 14a-11) that would, under certain circumstances, require companies to include disclosures about shareholder nominees for directors in the companies’ proxy materials proposed by long-term or significant shareholders who are not seeking a change of control. The requirement does not apply to shareholders who are prohibited from nominating a director under state corporate law or under the company’s organizational documents. Second, the SEC is proposing an amendment to Exchange Act Rule 14a-8(i)(8) to prevent companies from excluding from their proxy materials shareholder proposals that would amend, or that request an amendment to, a company’s governing documents regarding nomination procedures or disclosures related to shareholder nominations. These proposals would be required to comply with the proposed Rule 14a-11.
To view the full text of the release, click here.