Overview

This week, the U.S. Securities and Exchange Commission approved measures that substantially change the nomination and election process for directors of public companies.

Under a new Exchange Act Rule 14a-11, a company will be required to, at its own expense, include, on the company’s proxy card, director nominees selected by a shareholder or a group of shareholders that meet certain eligibility requirements and to include information about such nominees in the company’s proxy statement (i.e., provide “access” to company proxy materials).

The principal eligibility standards are continuous ownership, for at least 3 years, of at least 3% of the total voting power of a company’s securities entitled to vote in the election of directors.

Access will be available for nominees for 25% of the board positions. Amendments to the proxy rules to facilitate the formation of nominating groups and solicitations
by nominating shareholders for their candidates were also adopted, as well as an amendment to the beneficial ownership reporting rules (under Regulation 13D-G) to permit otherwise qualifying institutional and other nominating shareholders to continue to file short-form reports (Schedule 13G).

The adopting release contains hundreds of pages of technical instructions and commentary about the new rules. This briefing is intended, among other things, to explain in shorter form the key aspects of the new rules and the SEC’s commentary.

To read on click ‘View Briefing’