SEC Delays Until 2010 Proposed Amendments Facilitating Shareholder Nominations of Directors


The U.S. Securities and Exchange Commission (the “SEC”) recently said that it will delay until 2010 its vote on amendments, proposed earlier this year, to facilitate shareholders’ rights to nominate directors.1 As a result, it is unlikely any of the proposed amendments will apply during the beginning of the 2010 proxy season.

Two-Pronged Approach

The proposed amendments would provide a two-pronged approach to increasing shareholders’ access to public companies’ proxy materials. The first prong, proposed Rule 14a-11, would allow shareholders of a company subject to the SEC’s proxy rules to include a short slate of director nominees in the proxy materials prepared by the company.2 To take advantage of Rule 14a-11, shareholders would be required to hold, for at least one year, a minimum percentage of the company’s outstanding stock, ranging from one percent of the largest companies to at least five percent of smaller companies. This requirement could be satisfied by a group of shareholders acting in concert.

The second prong is found in proposed amendments to Rule 14a-8, which currently allows a company to exclude from the company’s proxy materials shareholder proposals related to the nomination or election of directors or a procedure for the nomination or election of directors. The proposed amendment would prevent exclusion based solely on the grounds that the proposal requests an amendment to the company’s governing documents regarding director nomination.

Delayed SEC Vote

Although it was widely believed that the SEC might act on the proposed amendments as early as November of this year, SEC Chairman Mary Schapiro recently commented that “it is my hope to finalize the rules early in the new year.”3 Given the significant impact of the proposed amendments and the time required to prepare and distribute proxy materials, it is unlikely that rules enacted in 2010 will apply to the beginning of the 2010 proxy season. SEC Commissioner Elisse B. Walter has remarked, “Although I can’t give you a definite date, I expect we will likely move forward and consider an adopting release sometime in early 2010. This means of course that final rules are not likely to be in place at the beginning of next year’s proxy season.”4

There are several reasons for the SEC’s delaying until next year its adoption of the proposed rules...

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For more information about this issue, please contact one of the members of the Securites/Capital Markets group listed at the end of the alert.

1 For additional information on the proposed amendments see SEC Proposes Rule Amendments to Facilitate Rights of Shareholders to Nominate Directors, available at

2 If adopted as originally proposed, Rule 14a-11 would apply except to the extent applicable state law or a company’s governing documents provide otherwise.

3 SEC won’t issue shareholder access rules this year, by Marcy Gordon, available at

4 SEC Rulemaking—“Advancing the Law” to Protect Investors, Address at the 48th Annual Corporate Counsel Institute by Commissioner Elisse B. Walter (Oct. 2, 2009), available at


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