October 17, 2019

October 17, 2019

Subscribe to Latest Legal News and Analysis

October 16, 2019

Subscribe to Latest Legal News and Analysis

October 15, 2019

Subscribe to Latest Legal News and Analysis

October 14, 2019

Subscribe to Latest Legal News and Analysis

D.C. Circuit Invalidates SEC's Proxy Access Rules

July 22, in Business Roundtable v. Securities & Exchange Commission, No. 10-1305 (D.C. Cir. July 22, 2011), the United States Court of Appeals for the District of Columbia Circuit issued its decision invalidating the SEC’s proxy access rules adopted in August 2010 with the intention that they be effective for the 2011 proxy season (see our blog here). The Business Roundtable and U.S. Chamber of Commerce filed the lawsuit in September 2010 challenging the SEC’s adoption of proxy access rules and separately requesting for the SEC to stay implementation of the rules pending the outcome of the lawsuit. The SEC granted the request for stay in October 2010 and issuers were relieved of the burdens of proxy access for the 2011 proxy season. (See our blog posts here and here.)

The Court found that the Commission “neglected its statutory responsibility to determine the likely economic consequences of Rule 14a-11 and to connect those consequences to efficiency, competition, and capital formation.” The Court also criticized the SEC’s reliance on empirical data that purported to demonstrate that proxy access would improve board performance and increase shareholder value by facilitating the election of dissident nominees, pointing out numerous studies submitted in the rule comment process that reached the opposite result.

The SEC’s proxy access rules also included an amendment to Rule 14a-8 that would authorize stockholder proposals to establish a procedure for stockholders to nominate directors. The SEC stayed implementation of the changes to Rule 14a-8 at the same time it stayed implementation of Rule 14a-11; however, the changes to Rule 14a-8 were not affected by the Court’s decision.

The SEC will now need to decide whether to propose new regulations for proxy access and whether to permit Rule 14a-8 to go effective.  However the SEC decides to proceed, it seems unlikely that public companies will face mandatory proxy access for the 2012 proxy season. 

Copyright © 2019, Sheppard Mullin Richter & Hampton LLP.

TRENDING LEGAL ANALYSIS


About this Author

John Tishler, capital markets, corporate finance, attorney, Sheppard Mullin, law
Partner

Mr. Tishler is a partner in the Corporate Practice Group in the firm's Del Mar Heights office and is the Co-Chair of the firm's Capital Market/Public Companies team.

Areas of Practice

Mr. Tishler's practice encompasses domestic and international capital markets, corporate finance, corporate governance, business transactions, mergers and acquisitions and technology. He advises established NYSE, NASDAQ and international exchange issuers and smaller high-growth clients on capital structures, equity and...

858-720-8943