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MONTH-IN-BRIEF (Sep 2020)

Securities Regulation

SEC Adopts Long-Awaited Amendments to Modernize Shareholder Proposal Rule

By Alan J. Wilson, WilmerHale

On September 23, the Securities and Exchange Commission (SEC) adopted amendments to the shareholder proposal rule – Rule 14a-8 under the Securities Exchange Act of 1934.  As the Commission noted in announcing the rule changes, Rule 14a-8 has not been substantively changed since 1998 in the case of the initial submission eligibility thresholds and 1954 in the case of the resubmission shareholder support thresholds, so the rule changes represent a significant development and modernization of the shareholder proposal system. 

Among the more significant changes, the amendments to Rule 14a-8(b) replace the current ownership threshold to submit a proposal with three alternative ownership thresholds, prohibit the aggregation of holdings for satisfying the amended ownership thresholds, require that shareholder proponents using a representative to submit a proposal provide documentation to make clear the representative’s authority to act on the shareholder’s behalf, and require that shareholder proponents offer times to meet with company management regarding the proposal.  Amendments to Rule 14a-8(c) limit the ability of individual persons – whether a shareholder proponent or representative – to submit more than one proposal to an individual company.  For proposal resubmissions, the amendments to Rule 14a-8(i)(12) increase the level of shareholder support that a proposal must receive to be eligible for resubmission at the same company’s future meetings.

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