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The SEC’s Shareholder Nomination Proposals
August 10, 2007 Full PDF
The SEC has published its controversial proposals that include two opposing approaches to address the ability of shareholders to include director nominees in a company's proxy materials. These proposals are the culmination of an ongoing debate over what constitutes an appropriate shareholder nomination process. One proposal would, in general terms, (i) require companies to include in their proxy materials proposals for binding bylaw amendments that establish a procedure by which shareholder nominees would be included in company proxy materials, if the proposal is submitted by a more-than-5% shareholder (or shareholder group) that qualifies to file, and has filed, a Schedule 13G as an institutional or passive investor and (ii) promote shareholder communication by eliminating certain federal securities law ambiguities surrounding the formation of online shareholder discussion forums, in each case subject to certain conditions. The other proposal would codify the interpretation of Rule 14a-8(i)(8) that companies may exclude from their proxy materials any shareholder proposal that would result in an immediate election contest or set up a process for shareholders to conduct a future election contest by requiring the inclusion of a shareholder nominee in subsequent proxy materials.