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.