The Securities and Exchange Commission voted on September 23, 2020 to adopt amendments to its rules governing shareholder proposals. The changes affect both companies that receive shareholder proposals and the shareholders who submit them.
Rule 14a-8 requires companies subject to the federal proxy rules to include shareholder proposals in their proxy statements, subject to certain procedural and substantive requirements. A company may exclude a proposal if it fails a specified procedural or substantive requirement, or if the shareholder does not satisfy certain eligibility or procedural requirements.
The amendments do three main things. They amend the criteria a shareholder must satisfy to be eligible to have a proposal included, modify the rule limiting the number of proposals a person or entity may submit for a particular company's shareholder meeting, and revise the levels of shareholder support a proposal must receive to be eligible for resubmission at the same company's future shareholder meetings.
Why the ownership thresholds matter for editors
Rule 14a-8(b) was amended to replace the prior ownership thresholds, which required holding at least $2,000 or 1% of a company's securities for at least one year. The amended rule introduces three alternative thresholds: $2,000 for at least 3 years, $15,000 for at least 2 years, or $25,000 for at least 1 year.
These are exact dollar figures and holding periods, not approximations. When drafting a compliance note or a news item about a shareholder proposal, quote the threshold and the holding period together, because a lower dollar amount comes with a longer holding period.
| Rule version | Ownership threshold | Minimum holding period |
|---|---|---|
| Pre-amendment | At least $2,000 or 1% of a company's securities | At least 1 year |
| Amended (option 1) | At least $2,000 | At least 3 years |
| Amended (option 2) | At least $15,000 | At least 2 years |
| Amended (option 3) | At least $25,000 | At least 1 year |
Aggregation and co-filing
The amendments to Rule 14a-8(b) also prohibit shareholders from aggregating their holdings for the purpose of satisfying the amended ownership thresholds. Although shareholders are permitted to co-file proposals, each co-filer must individually satisfy one of the ownership thresholds.
This is a common place for imprecise writing. A statement that a group of shareholders jointly holds enough shares does not establish eligibility under the amended rule. The accurate phrasing is that each co-filer must individually meet one of the three thresholds.
Using a representative: required documentation
New paragraph (b)(iv) requires a shareholder who elects to use a representative to submit a shareholder proposal to provide written documentation that does the following:
- identifies the company to which the proposal is directed;
- identifies the annual or special meeting for which the proposal is submitted;
- identifies the shareholder submitting the proposal and the shareholder's designated representative;
- includes the shareholder's statement authorizing the designated representative to submit the proposal and otherwise act on the shareholder's behalf;
- identifies the specific topic of the proposal to be submitted;
- includes the shareholder's statement supporting the proposal.
A useful way to present this in an article or internal note is a checklist rather than a paragraph. Each item is a separate document element, and readers who are assembling a filing need to see the items individually.
Availability to meet with the company
New paragraph (b)(iii) requires each shareholder to state that he or she is able to meet with the company, either in person or via teleconference, no less than 10 calendar days, nor more than 30 calendar days, after submission of the shareholder proposal. The shareholder must also provide contact information as well as specific business days and times that the shareholder is available to discuss the proposal with the company.
Note that this is a calendar-day window, not a business-day window, and that it runs after submission. When summarizing this requirement, keep "10 calendar days" and "30 calendar days" together so a reader does not mistake it for a single deadline.
A short worked example of accurate phrasing
Hypothetical: Suppose a shareholder holds $15,000 of a company's securities for two years and submits a proposal using a representative. An accurate summary would say the shareholder elects one of the amended thresholds ($15,000 for at least 2 years), identifies the company and meeting in the representative documentation, includes an authorization statement, and states availability within the window of 10 calendar days to 30 calendar days after submission.
That example is illustrative only. It is not a statement that any particular filing met or failed the requirements. The source does not state outcomes for individual filings.
Checklist for assembling the facts
- State which threshold is being cited: $2,000 for 3 years, $15,000 for 2 years, or $25,000 for 1 year.
- Do not describe aggregated holdings as satisfying the threshold.
- If co-filers are involved, say each co-filer must individually satisfy one threshold.
- If a representative is used, list the required documentation items separately.
- Keep the availability window as 10 calendar days to 30 calendar days after submission.
- Separate the fact of the September 23, 2020 vote from any later implementation detail.
Status: what was adopted and what is described
The source states that the SEC voted on September 23, 2020 to adopt the amendments. It describes the amended ownership thresholds, the aggregation prohibition, the representative documentation requirement, and the availability statement requirement. It also states that the amendments revise the levels of shareholder support a proposal must receive to be eligible for resubmission.
When writing for readers who track rule changes, distinguish the adoption vote from the specific effective dates and transition provisions, which are not spelled out in the material available here.
What the source does not say
The source does not provide the specific numerical resubmission support thresholds, only that the levels were revised. It does not state effective dates, transition rules for pending proposals, or whether any threshold applies differently to different company sizes.
It does not state the number of proposals a person or entity may submit, only that the rule limiting that number was modified. It also does not describe how companies should evaluate or respond to the documentation, and it does not give examples of proposals that were included or excluded.
For those details, readers should consult the rule text and related releases rather than treating this guide as a complete statement of Rule 14a-8.