SEC Proposes Amendments to Shareholder Proposal Rule
On November 5, 2019, the SEC issued a release proposing amendments to Rule 14a-8 under the Securities Exchange Act of 1934, which is the rule that governs the process through which shareholders may submit proposals to be included in a company’s proxy statement. If adopted, the proposal would amend Rule 14a-8 as follows:
Share Ownership Requirement. At present, Rule 14a-8 requires that a shareholder must have owned at least $2,000 in market value, or 1 percent, of a company’s securities in order to submit a shareholder proposal for inclusion in the company’s proxy statement. The proposal sets forth a three-tiered ownership requirement structure, under which shareholders who own a smaller dollar amount of securities would be required to own those securities for a longer period of time before submitting a shareholder proposal.
Written Statements. The proposal would add requirements that a shareholder provide the company with written statements to the effect that the shareholder intends to continue to hold the requisite amount of securities through the date of the shareholder meeting and that the shareholder will be available to discuss the proposal with the company between 10 and 30 days of submission.
One Proposal. Rule 14a-8 currently provides that each shareholder may submit no more than one proposal to a company for a particular shareholder meeting. The current rule would be narrowed so that a single person may submit only one proposal for a particular meeting, whether submitted directly as a shareholder or indirectly as a shareholder representative.
Resubmission. The proposal would also raise the levels of shareholder support that a previous proposal must have received in order to be eligible for resubmission at the same company’s future shareholder meeting and would add a new provision that would allow companies to exclude proposals under certain circumstances in which shareholder support for the matter declines year over year.
The SEC requested comments as to whether special provisions should be considered for the amendment to Rule 14a-8 that would require shareholders to reaffirm proposals for open-end funds (which typically do not hold annual shareholder meetings) after some passage of time or, absent reaffirmation, allow the proposals to expire.
Comments on the SEC’s proposal are due 60 days after publication of the proposal in the Federal Register.
The SEC’s release is available here.