Vedder Price

Vedder Thinking | Articles SEC Adopts Amendments to Shareholder Proposal Rule

Newsletter/Bulletin

Reader View

On September 23, 2020, the SEC adopted amendments to Rule 14a-8 under the Securities Exchange Act of 1934, which provides the procedural and substantive requirements for the inclusion of shareholder proposals in a company’s proxy statement to shareholders. The amendments were adopted largely as proposed and include the following:

  • Share Ownership. Under the final rule, in order for a shareholder proposal to be eligible for inclusion, a shareholder must have continuously held voting securities with the following market values for the following periods:
  • o $2,000 for at least three years;
    o $15,000 for at least two years; or
    o $25,000 for at least one year.

Previously, a shareholder was required to have continuously held for one year at least $2,000 in market value, or 1 percent, of a company’s voting securities in order for the shareholder’s proposal to be eligible for inclusion in the company’s proxy materials.

  • Written Statements. The final rule requires a statement from each shareholder submitting a proposal that such shareholder intends to hold the requisite amount of securities through the date of the company’s meeting and is able to meet with the company no less than 10 and no more than 30 calendar days after the submission of the proposal. The written statement must include contact information as well as dates and times the shareholder is available to meet with representatives of the company.
  • One Proposal. Under the final rule, a person may not submit more than one proposal for consideration at a shareholder meeting, either directly as a shareholder or indirectly as a shareholder representative. Previously, the one proposal rule applied to each shareholder.
  • Resubmission. Under the final rule, a proposal previously included in the company’s proxy materials within the preceding five calendar years is ineligible for resubmission if the most recent vote on the proposal occurred within the preceding three calendar years and received:
    • less than 5 percent of the votes cast if previously voted on once;
    • less than 15 percent of the votes cast if previously voted on twice; or
    • less than 25 percent of the votes cast if previously voted on three or more times.

The SEC declined to adopt a provision permitting the exclusion of certain proposals for which support had declined compared to the immediately preceding shareholder vote on the matter.

The amendments will become effective 60 days after publication in the Federal Register and will apply to any shareholder proposal submitted after January 1, 2022, with a transition period permitting certain shareholders satisfying the prior share ownership threshold to submit proposals for consideration at a shareholder meeting held prior to January 1, 2023.
The SEC’s adopting release is available here.



Professionals



John S. Marten

Shareholder



Nathaniel Segal

Counsel



Jacob C. Tiedt

Shareholder



John M. Sanders

Associate