On November 17th, the SEC revised rules to allow shareholders to vote for their preferred combination of board nominees in contested elections. Under new Rule 14a-19, it will be mandatory for management or shareholders to use universal proxy cards when soliciting proxy votes for their own candidates in contested director elections. The rule requires that universal proxy cards list the names of all director candidates for an election at an upcoming shareholder meeting, whether or not the candidates were nominated by management or shareholders. Much like voting in person, the modifications will provide shareholders equal voting opportunity even when voting by proxy.
In accordance with the final rules:
each side may list the other side’s director candidates on its universal proxy card to facilitate the use of universal proxy cards
new notice, filing, formatting and presentation requirements for universal proxy cards have been established for all soliciting parties
shareholders submitting their own director nominees in the contest must solicit holders of at least 67 percent of the voting power of shares entitled to vote in the election
registrants and dissidents must provide each other with notice of the names of their nominees
a filing deadline and a minimum solicitation requirement for dissidents have been established
The amended universal proxy rules apply to all non-exempt solicitations for contested elections except those involving registered investment companies and business development companies.
The SEC also adopted rule amendments to the proxy rules requiring enhanced disclosure and voting options in all director elections. The updates both ensure that proxy cards clearly identify the appropriate shareholder voting options in all director elections and require proxy statements to disclose the effect of a shareholder’s election to withhold its vote.
Compliance with the amended rules pertaining to universal proxy cards will be required for all shareholder meetings involving contested director elections held after August 31, 2022. The revised rules concerning voting options also will apply to all shareholder meetings involving director elections held after August 31, 2022.
The final rules will go into effect 60 days after publication in the Federal Register.
For more information on the final rules, contact Christina Chalk, Senior Special Counsel, or David M. Plattner, Special Counsel, in the Office of Mergers and Acquisitions, at (202) 551-3440, Division of Corporation Finance, Securities and Exchange Commission, 100 F Street, NE, Washington, DC 20549.