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SEC Amendments Update Shareholder Proposal Rule

Sunday, September 27, 2020  
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On Sept. 23, 2020, the Securities and Exchange Commission voted to adopt amendments to modernize its shareholder proposal rule, which governs the process for a shareholder to have its proposal included in a company’s proxy statement for consideration by all of the company’s shareholders. 

With the amendments, the commission seeks to help ensure that the ability to have a proposal included alongside management’s in a company’s proxy materials is appropriately calibrated and takes into consideration the interests of the shareholder who submits the proposal, the company and other shareholders who bear the costs associated with the inclusion of such proposals in the company’s proxy statement.

Under the rules, any shareholder may submit an initial proposal after having held $2,000 of company stock for at least three years, or higher amounts for shorter periods of time. The rules also provide for a transition period so that shareholders who are currently eligible at the $2,000 threshold will remain eligible to submit a proposal for inclusion in the company’s proxy statement so long as they continue to maintain at least their current holdings through the date of submission and the date of the relevant meeting. 

The amendments will be effective 60 days after publication in the Federal Register, and the final amendments will apply to any proposal submitted for an annual or special meeting to be held on or after Jan. 1, 2022. The final rules also provide for a transition period with respect to the ownership thresholds that will allow shareholders meeting specified conditions to rely on the $2,000/one-year ownership threshold for proposals submitted for an annual or special meeting to be held prior to Jan. 1, 2023.

See the SEC’s complete announcement and final rule.