Expect More Boardroom Chaos as SEC Adopts Universal Proxy
Posted on 11/19/2021
On November 17, 2021, the U.S. Securities and Exchange Commission (SEC) adopted new Rule 14a-19 and amendments to existing rules under the Securities Exchange Act of 1934 to require the use of “universal” proxy cards in all nonexempt director election contests at publicly traded companies in the U.S. This dramatically changes the rules for proxy contests. The new “Universal Proxy Rules” contain only slight modifications from rules the SEC first proposed in October 2016, for which the SEC reopened the public comment period during 2021. The Universal Proxy Rules confer substantially more significant rights to shareholders without any minimum ownership requirements. For example, only owning one share for one minute would be sufficient. The new rules are likely to embolden activist investors and increase the incidence of contested director elections.
Shareholders can pick individual directors, rather than being required to vote for an entire slate of nominees. Shareholders will be more inclined to support one or two dissident nominees when they can do it on a universal proxy card
The rules will take effect for shareholder meetings after August 31, 2022.
SECURITIES AND EXCHANGE COMMISSION. 17 CFR Part 240. Release No. 34-93596; IC-34419; File No. S7-24-16. RIN 3235-AL84. Universal Proxy
AGENCY: Securities and Exchange Commission.
ACTION: Final rule.
LINK: https://www.sec.gov/rules/final/2021/34-93596.pdf