SEC Rule Amendments Add Additional Hurdles for Shareholders

Recently, the SEC adopted amendments to its shareholder proposal rule, Rule 14a-8, in order to “facilitate engagement among shareholder-proponents, companies and other shareholders, including preserving the ability of smaller shareholders to access the proxy statements of the companies in which they have demonstrated a continuing interest.”  Nevertheless, the amendments serve only to place further requirements on shareholders who would like to have a proposal included in proxy materials.  

More specifically, the amendments significantly raise the holding and time requirements that a shareholder must meet to qualify:  $2,000 for at least three years; $15,000 for at least two years; or $25,000 for at least one year.  In addition to other disclosure and threshold requirements, the amendments, inter alia, prohibit shareholders from aggregating holdings to meet said thresholds and representatives from submitting more than one proposal regardless of how many qualified shareholders are being represented.

Considering the focus on raising thresholds, including the bar on aggregation, it is unclear how these amendments help “smaller shareholders.”  What is clear is that these amendments serve as another tool for the managers of public companies to silence dissident owners.

A copy of the final rule can be found here.