In a 3-2 vote, the SEC adopted new proxy access rules that will allow company shareholders to include the names of shareholder nominees within the company’s proxy materials, provided the shareholder is not looking to change control of the company. The new rule applies to all companies subject to proxy rules under the Securities Exchange Act of 1934. This includes both open-end and closed-end investment companies.
The nominating shareholder or group is subject to the following eligibility requirements. The shareholder must own at least 3% of the outstanding shares of a company and have held those shares continuously for at least three years. The shareholder must also represent the intention to hold the shares through the voting date.
The nominating shareholder must also provide the company with notice of its intent. The shareholder or group must provide the company with Schedule 14N, which includes detailed information on the nominee(s). Nominating shareholders must provide this information to the company at least 120 days but no more than 150 days before the anniversary date that the company mailed the prior year’s proxy. Notice must also be filed with the SEC.
Those shareholders or groups may include nominations of at least one, but no more than 25%, of the company’s board of directors. If the company is listed on a stock exchange, the shareholder nominees must meet the objective independence standards of the exchange.
The effective date of the Rule is November 15, 2010. Rule compliance is also required by November 15, 2010.