SEC Issues Proposed Rules Requiring Use of Universal Proxy
The Securities and Exchange Commission has proposed amendments to the federal securities laws that would require use of universal proxies in connection with contested elections of directors. These universal proxies would include the names of all nominees for election to the board of directors, including both the registrant’s slate of nominees and a dissident party’s nominees.
Under the current regime, the registrant presents its slate of nominees for director in its proxy statement and proxy card that the registrant sends to its shareholders, and the dissident party presents its nominees in its own proxy statement and proxy card. The federal securities laws do not currently require either the registrant or the dissident party to include the other’s nominees in its own proxy statement and proxy card. State laws generally prohibit a shareholder from submitting two separate proxy cards, even if the total number of nominees for whom a shareholder votes on two separate proxy cards does not exceed the number of directors to be elected. Therefore, a shareholder cannot vote for nominees on both the registrant’s proxy card and the dissident’s proxy card unless the shareholder attends the registrant’s annual meeting in person and votes by ballot at the meeting.
The proposed universal proxy rule would require all proxy cards used in a proxy solicitation in a contested election of directors to include the names of all duly nominated candidates, whether nominated by the registrant or by a dissident party. The proposed rule would be applicable to proxy solicitations by both the registrant and dissident shareholders, and would require each party that is soliciting proxies to formally notify the other party of its slate of nominees for inclusion on the proxy card. The SEC’s purpose with the proposed rule is to align the voting process and choices that are available to shareholders that vote by proxy with the voting process and choices available to shareholders that vote in person at the shareholder meeting, where the voting ballots include the names of all nominees.
The SEC has solicited comments on the proposed amendments by January 9, 2017.