October 22, 2021

Volume XI, Number 295

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SEC Staff Issues Three No-Action Letters Regarding Proxy Access Proposals

On September 27, the staff (Staff) of the Securities and Exchange Commission’s Division of Corporation Finance issued three no-action letters relating to proxy access proposals. In two of the no-action letters, the Staff stated that it would not recommend enforcement action if the company seeking no action relief omitted proposals to adopt proxy access bylaws in reliance upon Rule 14a-8(i)(10) under the Securities Exchange Act of 1934, where the company adopted “standard” proxy access bylaws. In the third no-action letter, however, the Staff was unable to concur with a company’s view that a proposal to amend existing proxy access bylaw provisions could be excluded from the company’s proxy statement in reliance upon Rule 14a-8(i)(10). 

Rule 14a-8(i)(10) allows a company to exclude a shareholder proposal from its proxy statement if the company has “substantially implemented” the proposal. Applying Rule 14a-8(i)(10), the Staff has permitted companies to exclude proposals where the applicable company’s policies, practices and procedures compared favorably with the guidelines of the proposal. The Staff also has indicated that Rule 14a-8(i)(10) does not require a company to implement the action requested in a proposal exactly as proposed, so long as the company action satisfies the “essential objective” of the proposal.

Consistent with these principles (and several no-action letters issued in February, the September 27 no-action letters clarify that a company’s own proxy access bylaw may “substantially implement” a proposal to adopt proxy access bylaw provisions, despite the fact that the proposal deviates in some respects from the provision adopted by the company, even where the company’s bylaw excludes various ancillary terms specifically highlighted in the proposal as “essential elements for substantial implementation.” For instance, the company bylaws that the Staff determined to have substantially implemented the proposals at issue in the September 27 no-action letters: (1) limited the number of shareholders whose holdings could be aggregated to 20 shareholders (in contrast to the proposal, which did not restrict the number of shareholders that could form a group for such purposes); (2) limited proponents access to 20 percent of the board seats (in contrast to the proposal, which provided for access to 25 percent of the board); and (3) in one instance, imposed a two-year restriction for re-nomination of candidates who fail to receive the requisite percentage of votes (instead of no restriction on re-nominations, as proposed).

In contrast (and consistent with a no-action letter issued to H&R Block in July 2016), a proposal to amend specific aspects of an existing proxy access bylaw could not be excluded under Rule 14a-8(i)(10) on the same grounds. These letters suggest that a company could not exclude a proposal to amend even a “market” proxy access bylaw without taking some responsive action. At least two other companies are awaiting responses from the Staff regarding requests for similar no action relief.

©2021 Katten Muchin Rosenman LLPNational Law Review, Volume VI, Number 281
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About this Author

Jonathan D. Weiner, securities, transactional lawyer, Katten Muchin Law firm
Associate

Jonathan Weiner concentrates his practice in securities, transactional and general corporate matters. He has represented investors and issuers in public and private financings (including private investments in public equity), tender offers, recapitalizations and going private transactions, as well as targets and acquirers in mergers and acquisitions. He also advises clients on a day-to-day basis regarding corporate governance, securities law compliance, disclosure and other general corporate matters. Jonathan has counseled a wide array of businesses, ranging from...

212-940-6349
Mark D. Wood, corporate securities lawyer Katten Muchin Chicago Law firm
Partner

Mark D. Wood is head of Katten's Securities practice and concentrates in corporate and securities law. Mark represents public companies, issuers and investment banks in initial public offerings (IPOs) and other public offerings, private investment in public equity (PIPE) transactions, debt securities and other securities matters.

Mark also represents clients in complex corporate transactions, including tender offers, mergers, acquisitions, dispositions, going-private transactions, private equity investments, joint ventures and...

312-902-5493
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