Yesterday, the SEC proposed amendments to the proxy rules that would require parties in a contested election to use universal proxy cards that would include the names of all director nominees. The proposal would permit shareholders to vote by proxy for their preferred combination of board candidates – as they could do if they attended the meeting & voted in person. Here’s the 243-page proposing release.
The proposed rules would:
– Allow shareholders to vote for the nominees of their choice by requiring proxy contestants to provide shareholders with a universal proxy card including the names of both management & dissident nominees.
– Enable parties to include all nominees on their universal proxy cards by changing the definition of a “bona fide nominee” in Rule 14a-4(d).
– Eliminate the Rule 14a-4(d)(4)’s “short slate rule,” since dissidents would no longer need to round out partial slates with management’s nominees.
– Require proxy contestants to notify each other of their respective director candidates by specific dates.
– Require dissidents to solicit shareholders representing at least a majority of the voting power of shares entitled to vote on the election of directors
– Require proxy contestants to refer shareholders to the other party’s proxy statement for information about that party’s nominees and inform them that it is available for free on the SEC’s website.
– Require dissidents to file their definitive proxy statement with the Commission by the later of 25 calendar days prior to the meeting date or five calendar days after the registrant files its definitive proxy statement.
The SEC also proposed amendments to Rule 14a-4(b), which would require proxy cards to include an “against” voting option for director elections when that vote has a legal effect, & also enable shareholders to “abstain” in a director election governed by a majority voting standard.
The ability to provide a “withhold” voting option when an “against” vote has legal effect would be eliminated. In addition, the proposed amendments to Item 21(b) of Schedule 14A would require disclosure about the effect of a “withhold” vote in an election of directors.
We’ll be posting memos in our “Proxy Fights” Practice Area.
– John Jenkins