Securities Law Prof Blog

Editor: Eric C. Chaffee
Univ. of Toledo College of Law

Wednesday, August 25, 2010

The Cheat Sheet on the New Directors' Nominations Proxy Rules

Here is the SEC's Announcement about the new Directors' Nominations Rules (Proxy Access) that includes a Fact Sheet with a basic description of new rules (for those who don't have time to read the 400 page release):

The new rules require companies to include the nominees of significant, long-term shareholders in their proxy materials, alongside the nominees of management. This "proxy access" is designed to facilitate the ability of shareholders to exercise their traditional rights under state law to nominate and elect members to company boards of directors.

Under the rules, shareholders will be eligible to have their nominees included in the proxy materials if they own at least 3 percent of the company's shares continuously for at least the prior three years.

Under the new rules:

Shareholders who otherwise are provided the opportunity to nominate directors at a shareholder meeting under applicable state or foreign law would be able to have their nominees included in the company proxy materials sent to all shareholders.

Shareholders also have the ability to use the shareholder proposal process to establish procedures for the inclusion of shareholder director nominations in company proxy materials.

Application of the new access rules to the smallest public companies — those that are defined as "smaller reporting companies" under SEC rules — will be deferred for three years.

Generally, the new rules will become effective 60 days after their publication in the Federal Register.

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