SEC Proposes Amendments to Require Use of Universal Proxy Cards

October 27, 2016

The U.S. Securities and Exchange Commission, in a 2-1 vote, proposed amendments on October 26, 2016 to the proxy rules that would require public companies to include director candidates nominated by a dissident shareholder on the same ballot as the directors nominated by the company’s management.

Highlights

  • Proposed amendments would require public companies to include dissident nominees on same proxy card as management nominees in contested elections—a universal proxy card
  • Amendments would reduce disparity between choices shareholders can make in person at a shareholder meeting and choices currently available under proxy rules
  • Dissident nominees would only qualify for inclusion on universal proxy card if dissident solicits votes from holders of at least a majority of the company’s voting shares
  • Because dissidents would be required to incur solicitation expenses to qualify to use universal proxy, the proposed amendments are not likely to replace or have much impact on proxy access, which does not require solicitation
  • Proxy cards would be required to include an “against” option when there would be a legal effect to that vote and to provide shareholders with the ability to “abstain” in a director election governed by a majority voting standard
  • Proposed amendments generally would not apply to registered investment companies, business development companies or foreign private issuers
  • Although uncertain, it is not likely that the proposed amendments would apply to the 2017 spring proxy season
  • The practical impact is uncertain, with no consensus among prognosticators as to whether adoption would increase the likelihood of proxy fights or affect their outcome

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