On November 17, 2023, the staff of the U.S. Securities and Exchange Commission (“SEC”) issued one revised and five new proxy-related compliance and disclosure interpretations (“C&DIs”). These C&DI’s are summarized below, with links to the full text provided.
10 Calendar Days
Revised Question 126.03 clarifies the “10 calendar day” period in Rule 14a-6 between filing a preliminary proxy statement and the definitive proxy statement. As an example, this C&DI specifies that if a preliminary proxy statement is filed on or before 5:30 p.m. Eastern Time on Friday, October 20, 2023, then Sunday, October 29, 2023, would be day ten, allowing the company to send its definitive proxy statement to security holders starting at 12:01 a.m. on October 30, 2023. However, if the company files its preliminary proxy statement after 5:30 p.m. on Friday, October 20, 2023, the 10-day period does not start until the next business day, which would be Monday, October 23, 2023.
New Question 132.03 addresses Rule 14a-12, which permits solicitations before the furnishing of a proxy statement, provided that, among other things, written soliciting material includes the required participant information or a prominent legend advising shareholders where they can find that information. This C&DI specifies that general references in a legend to filings made or to be made by the soliciting party or participants do not sufficiently advise shareholders where they can obtain the required participant information. According to this C&DI, the legend should:
- clearly identify the specific filing(s) where participant information appears (including by filing date);
- clearly describe the specific locations of the participant information in such filings, whether by reference to the relevant section headings, captions or otherwise; and
- include active hyperlinks to the referenced filings, when possible.
New Question 139.07 notes that Rule 14a-19(e)(7) requires a universal proxy card to prominently disclose the treatment and effect of a proxy executed in a manner that grants authority to vote “for” the election of more nominees than the number of director seats up for election (an “overvoted proxy card”) or fewer nominees than the number of director seats up for election (an “undervoted proxy card”). This C&DI specifies that a soliciting party may not use discretionary authority to vote the shares represented by overvoted proxy cards in accordance with that party’s voting recommendation for the director. However, the shares represented by an overvoted proxy card can be voted on other matters included on the proxy card for which there is no overvote and can be counted for purposes of determining a quorum. The treatment and effect of the corresponding voting instruction form (“VIF”) should be the same as that disclosed on a universal proxy card. The staff indicated that this interpretive position does not prohibit intermediaries from contacting shareholders or beneficial owners to seek a correction of an overvoted proxy card or VIF before the meeting date.
New Question 139.08 explains that the shares represented by an undervoted proxy card can be voted in accordance with the shareholder’s specifications and therefore that a soliciting party may not use discretionary authority to vote the shares represented by undervoted proxy cards for the remaining director seats up for election in accordance with that party’s voting recommendation. The treatment and effect of the corresponding VIF should be the same as that disclosed on a universal proxy card.
New Question 139.09 provides that a soliciting party may use discretionary authority to vote the shares represented by a signed but unmarked proxy card in accordance with that party’s voting recommendations because the shareholder has not specified any choices. This C&DI notes that Rule 14a-19(e)(7) requires that a universal proxy card prominently disclose the treatment and effect of a proxy executed in a manner that does not grant authority to vote with respect to any nominees. The treatment and effect of the corresponding VIF should be the same as that disclosed on a universal proxy card.
Note A of Schedule 14A
New Question 151.02 addresses, for the purposes of Note A of Schedule 14A, the solicitation of security holder approval for the authorization of additional shares of common stock following an acquisition of another company in a transaction not requiring security holder approval where a portion of the consideration consists of securities convertible into shares of the company’s common stock or, at the company’s option, cash. This C&DI explains that a proposal “involves” another matter within the meaning of Note A when information about the other matter that is called for by Schedule 14A is material to a security holder’s voting decision on the proposal presented, which depends on all the relevant facts and circumstances. According to this C&DI, the authorization of additional shares of common stock is an integral part of the acquisition because it is necessary for the company to meet its obligation under the convertible securities issued as consideration for the acquisition. Therefore, the proposal to authorize additional shares of common stock “involves” the acquisition. In such circumstances, the company would have to include in the proxy statement information about the acquisition called for by Schedule 14A, unless such information has already been disclosed or sufficient time has passed so that the registrant’s historical filings fully reflect the acquisition.