January 31, 2023

Volume XIII, Number 31


January 30, 2023

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Update: SEC Approves NYSE's Amendment to Rule 312.07 to Clarify That "Votes Cast" Should Be Calculated According to a Listed Company's Governing Documents and State Law

On November 19, 2021, the Securities and Exchange Commission approved, effective immediately, the New York Stock Exchange’s (NYSE) proposed amendment to Rule 312.07, which governs the treatment of shareholder votes and abstentions when shareholder approval is required for security issuances related to equity compensation plans under Rule 303A.08 and other issuances under Rule 312.03. As we previously reported, this amendment to Rule 312.07 clarifies long-standing confusion created by historical NYSE guidance requiring that NYSE-listed companies treat abstentions as votes cast “against” a proposal for matters where NYSE rules separately required shareholder approval, a practice that was inconsistent with Nasdaq Stock Market LLC (Nasdaq) guidance. The amended rule does not prescribe a particular interpretation of “votes cast” under Rule 312.07 but rather, like Nasdaq’s treatment of “votes cast,” allows a listed company to calculate votes cast in accordance with its governing documents and applicable state law. Further, pursuant to the amended rule, the treatment of “votes cast” will be the same (i.e., in accordance with a company’s governing documents and applicable state law) for any other proposals for which the NYSE rules and guidance require an issuer to obtain shareholder approval.

Despite this much-needed clarification, the calculation of votes under NYSE and Nasdaq rules, state law, and a company’s governing documents will remain a highly technical matter. Therefore, companies are encouraged to seek guidance from counsel regarding the applicable voting standards and the interplay between the relevant exchange’s rules, state law, and a company’s governing documents for the purposes of calculating shareholder votes, including the treatment of abstentions and broker non-votes.

Rachel Solino, an associate attorney at Jones Walker, contributed to this article.

© 2023 Jones Walker LLPNational Law Review, Volume XI, Number 336

About this Author

Alexandra Clark Layfield Corporate Attorney Jones Walker Law Firm

Alexandra Layfield joined Jones Walker's Corporate & Securities Practice Group in 2008. Ms. Layfield's practice is exclusively transactional, concentrating principally on the areas of securities law, mergers and acquisitions, general corporate law and corporate governance matters. Alexandra Layfield is a partner in the Corporate Practice Group.

At Jones Walker, she leads the firm’s corporate, securities and executive compensation team. Alex serves as outside corporate and securities counsel for public companies, including acting as boardroom...

Thomas Kimball, Jones Walker Law Firm, New Orleans, Corporate Law Attorney

Thomas D. Kimball is an associate in the firm’s Corporate & Securities Practice Group and practices from the firm’s New Orleans office. He is a 2016 graduate of the Loyola University New Orleans College of Law, where he received a juris doctor degree, summa cum laude, a Certificate in Law, Technology, and Entrepreneurship, and earned the William L. Crowe, Sr. Scholar distinction. In addition, Mr. Kimball was an Articles Editor on the Loyola Law Review Editorial Board and served in Loyola’s Entrepreneurship Project, a partnership with Propeller which...

Emily Gauthier Corporate Attorney Jones Walker Baton Rouge, LA

Emily Gauthier is an associate in the Corporate Practice Group.

Emily represents public and private companies in a variety of corporate and commercial law matters. Her practice focuses on securities offerings and mergers and acquisitions. She advises on corporate governance matters and the disclosure and reporting requirements of securities laws and capital markets, including the review of proxy statements; annual, quarterly, and current reports; and other SEC filings.

While earning her law degree, Emily served as articles editor of the Louisiana Law Review and as a...