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SEC Adopts Mandatory Universal Proxy Rules

By | November 17, 2021

In 2016 the SEC adopted proposed rules related to use of universal proxies in contested director elections. The SEC has now adopted final rules.  The SEC also adopted changes to the form of proxy and proxy statement disclosure requirements applicable to all director elections.

The new rules will require use of a “universal proxy card” in all non-exempt director election contests. This universal proxy card must include the names of all duly nominated director candidates presented for election by any party and for whom proxies are solicited. The SEC believes requiring a universal proxy card in non-exempt director election contests is the most effective means to ensure that shareholders voting by proxy are able to elect directors in a manner consistent with their right to vote in person at a shareholder meeting.

The final rules:

  • Require the use of a universal proxy card by all participants in a non-exempt director election contest. The universal proxy card must include the names of both registrant and dissident nominees, along with certain other shareholder nominees included as a result of proxy access;
  • Expand the determination of a “bona fide nominee” to include a person who consents to being named in any proxy statement for a registrant’s next shareholder meeting for the election of directors;
  • Require dissidents to provide registrants with notice of their intent to solicit proxies and to provide the names of their nominees no later than 60 calendar days before the anniversary of the previous year’s annual meeting;
  • Require registrants to notify dissidents of the names of the registrants’ nominees no later than 50 calendar days before the anniversary of the previous year’s annual meeting;
  • Require dissidents to file their definitive proxy statement by the later of 25 calendar days before the shareholder meeting or five calendar days after the registrant files its definitive proxy statement;
  • Require each side in a proxy contest to refer shareholders to the other party’s proxy statement for information about the other party’s nominees and refer shareholders to the Commission’s website to access the other side’s proxy statement free of charge;
  • Require that dissidents solicit the holders of shares representing at least 67% of the voting power of the shares entitled to vote at the meeting; and
  • Establish presentation and formatting requirements for universal proxy cards that ensure that each party’s nominees are presented in a clear, neutral manner.

The SEC also adopted, as proposed, changes to the form of proxy and proxy statement disclosure requirements applicable to all director elections. These amendments:

  • Require proxy cards to include an “against” voting option in director elections, when there is a legal effect to a vote against a director nominee;
  • Require that the proxy card provide shareholders with the ability to “abstain” in a director election where a majority voting standard applies; and
  • Require proxy statement disclosure about the effect of a “withhold” vote in an election of directors.

Compliance with the new rules will be required for shareholder meetings held after August 31, 2022.

Contact Steve Quinlivan for more information.