SEC Adopts Mandatory Universal Proxy Rules

• Published in: The Corporate Governance Advisor 2022-03, Vol.30 (2), p.14-19
• Main Authors: Donahue, Sean, Newell, John, Ayoola, Folake, Hammons, Jim, Visek, Lauren
• Format: Article
• Language: English
• Subjects: Amendments; Directors; Elections; Nominations; Proxy statements; SEC proxy rules; Shareholder voting
• ISSN: 1067-6163

In this regard, the universal proxy rules provide dissidents with a new way to access a company's proxy card in contested director elections, and unlike "proxy access" bylaws, without having to meet any share ownership thresholds or holding period requirements. Companies Subject to the Universal Proxy Rules The universal proxy rules will not apply to registered investment companies or business development companies, but the amendments that require disclosure about the effect of "withheld" votes on director elections and the requirements that apply to voting choices on proxy cards will apply to such companies. Because foreign private issuers are exempt from SEC proxy rules, they will be exempt from all of the amendments. Amendments Applicable to All Director Elections The SEC adopted several amendments that are not related to the universal proxy process. * When applicable state law gives legal effect to votes cast against a nominee, the proxy card must provide a means for shareholders to vote against each nominee and a means for shareholders to abstain from voting, rather than providing a means to withhold authority to vote. * When applicable state law does not give legal effect to votes cast against a nominee, the proxy card shall not provide a means for shareholders to vote against any nominee. [...]the proxy card must clearly provide one of the four means specified in Rule 14a4(b) for shareholders to withhold authority to vote for each nominee. * The proxy statement must disclose how votes will be counted, including the treatment and effect abstentions, broker non-votes, and, to the extent applicable, withholding authority to vote for a nominee in an election of directors under applicable state law and a company's organizational documents. * The company's proxy statement must disclose the deadline for providing notice of a solicitation of proxies in support of director nominees, other than the company's nominees, pursuant to a universal proxy solicitation under Rule 14a-19 for the company's next annual meeting.