The SEC voted to propose amendments to the proxy rules to require parties in a contested election to use universal proxy cards that would include the names of all board of director nominees.
According the SEC, the proposed changes would enable shareholders to vote by proxy in a way that more closely resembles how they vote in person at a shareholder meeting and would make it easier for shareholders to vote for the combination of candidates they prefer.
Under the proposed amendments:
- Proxy contestants would be required to provide shareholders with a universal proxy card that includes the names of both management and dissident nominees, which would allow shareholders to vote by proxy for the combination of nominees of their choice. Universal proxy cards would be required in all non-exempt solicitations in contested elections
- The definition of a “bona fide nominee” in Rule 14a-4(d) would be changed to include a person who agrees to be named in any proxy statement relating to a company’s next meeting of shareholders at which directors are to be elected. The amendment would enable parties to include all director nominees on their universal proxy cards.
- The “short slate rule,” Rule 14a-4(d)(4), would be eliminated because universal proxy cards would make it unnecessary for dissidents to round out their partial slates with management’s nominees
- Proxy contestants would be required to notify each other of their respective director candidates. A dissident would be required to provide a company with the names of the nominees for whom it intends to solicit proxies no later than 60 calendar days prior to the anniversary of the previous year’s annual meeting date. The company would be required to provide the dissident with the names of the nominees for whom the company intends to solicit proxies no later than 50 calendar days prior to the anniversary of the previous year’s annual meeting date.
- Dissidents would be required to solicit shareholders representing at least a majority of the voting power of shares entitled to vote on the election of directors
- Proxy contestants would be required to refer shareholders to the other party’s proxy statement for information about that party’s nominees and explain that shareholders can access the other party’s proxy statement for free on the Commission’s website. To ensure that shareholders who receive a universal proxy card will have access to information about all nominees a sufficient amount of time before the meeting, dissidents would be required to file their definitive proxy statement with the Commission by the later of 25 calendar days prior to the meeting date or five calendar days after the registrant files its definitive proxy statement.
- Universal proxy cards would be subject to presentation and formatting requirements to help ensure that universal proxy cards clearly and fairly present information
The proposed changes to require a universal proxy card would not apply to solicitations involving foreign private issuers or companies with reporting obligations only under Section 15(d) of the Exchange Act, which are not subject to the federal proxy rules, or registered investment companies or business development companies.
The Commission will seek public comment on the proposed rules for 60 days.
To read the complete proposal click HERE.