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On August 25, 2022, the SEC issued three
Compliance and Disclosure Interpretations (CDIs) regarding
the universal proxy rule (Rule 14a-19). Two of the CDIs (139.01 and
139.02) relate solely to proxy contests and will be covered in a
separate post. This post addresses new CDI 139.03, which should be
considered by any company filing a proxy statement, regardless of
whether the proxy statement relates to a contested solicitation.
CDI 139.03 addresses disclosure of the Rule 14a-19 universal proxy
notice deadline when a company’s advance notice bylaw imposes
a deadline that is earlier than the deadline imposed by Rule
14a-19, which is the case for many public companies.
Item 1 of Schedule 14A requires disclosure pursuant to Rule
14a-5(e). That Rule requires a company to disclose in its proxy
statement the deadline, under Rule 14a-19, for a dissident
shareholder to provide notice of its proxy solicitation in support
of its director nominees for election at the next annual meeting.
Rule 14a-19(b)(1) requires that such dissident shareholder provide
notice of its election contest, generally, no later than 60
calendar days before the anniversary of the prior year’s
annual meeting date. CDI 139.03 provides that where a
company’s advance notice bylaw requires notice earlier than
the time required by Rule 14a-19(b)(1), a company is permitted to
disclose only its earlier advance notice bylaw deadline to satisfy
Rule 14a-5(e)(4). Importantly, the CDI also notes that, to the
extent that the company’s advance notice bylaw does not set
forth the same requirements outlined in Rule 14a-19(b), the
company’s proxy statement must clearly state the need for the
dissident shareholder to comply with the additional requirements of
Many public companies’ advance notice bylaw requires
notice to be provided no earlier than 120 days and no later than 90
days prior to the first anniversary of the prior year’s
annual meeting. In addition, in our experience, many
companies’ bylaws do not mandate that a nominating
sharheolder provide all of the information required by Rule
14a-19(b) because they do not include the 67% percent solicitation
requirement of such Rule. While some companies have amended their
bylaws to include such requirement, many have not, given that the
universal proxy rule was adopted less than a year ago.
Given the foregoing, where applicable, we recommend that public
companies add the following sentence to their proxy statements, in
the section disclosing the various deadlines required by Rule
14a-5(e): “In addition, shareholders who intend to
solicit proxies in support of director nominees other than the
company’s nominees must also comply with the additional
requirements of Rule 14a-19(b)”.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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