In a previous blog post, we discussed the Delaware Chancery Court’s decision in Saba Capital Master Fund, Ltd. v. Blackrock Credit Allocation Income Trust and its relevance to the interpretation of advance notice bylaw provisions. On appeal, the Delaware Supreme Court reversed the decision of the Chancery Court and strictly applied the deadlines set forth in the defendants’ unambiguous advance notice bylaw provisions.

Background of the Chancery Court Decision

In Saba, the defendants were two affiliated closed-end funds who sought to disqualify the director nominees of an activist shareholder because the activist shareholder did not strictly comply with the requirements of the advance notice provisions of the defendants’ bylaws. As allowed pursuant to the bylaws of the funds, the defendants had requested a response to a supplemental information request from the activist shareholder before a five-business day deadline.


Continue Reading Advance Notice Bylaw Provisions Upheld by Delaware Supreme Court

This is a friendly reminder to our clients and friends that 2020 is a leap year, which means there is an extra day in the calendar: February 29, 2020.

Therefore, when updating your internal SEC reporting and proxy calendars, please keep this added day in mind.  For example, instruction G(3) of Form 10-K provides that the information required by Part III (Items 10, 11, 12, 13 and 14) may be incorporated by reference from the registrant’s definitive proxy statement, if such definitive proxy statement is filed with the Commission no later than 120 days after the end of the fiscal year covered by the Form 10-K.

In typical years, that 120-day date is April 30 for December 31 fiscal year end companies.  However, this year the cut-off date is Wednesday, April 29, 2020, as a result of leap day.


Continue Reading Don’t Forget: Update SEC Filing and Proxy Calendars for Leap Year 2020

Glass Lewis recently posted its comprehensive 2020 voting guidelines, which are summarized on the first page of the 2020 voting guidelines as well as on the Glass Lewis blog. Among other things, the 2020 voting guidelines update Glass Lewis’ voting guidance regarding excluded shareholder proposals. The updates are in response to the September 2019 guidance by the Staff of the Division of Corporation Finance (the Staff) regarding potential oral rather than written responses to 14a-8 no-action letter requests, as further outlined in recent our blog post.

As a general matter, Glass Lewis believes companies should only exclude a shareholder proposal when the Staff has explicitly concurred with a company’s argument for the exclusion of such shareholder proposal.

Staff Declines to Articulate a View on the Exclusion of a Shareholder Proposal

In instances where the Staff has declined to provide a view on whether the shareholder proposal is ripe for exclusion, Glass Lewis believes such a shareholder proposal should be included in the company’s proxy statement. In the event a company excludes such a shareholder proposal from its proxy statement, Glass Lewis will likely recommend that shareholders vote against the members of the company’s governance committee.


Continue Reading Glass Lewis Issues Policy Changes Regarding Excluded Shareholder Proposals

On November 5, the Securities and Exchange Commission (SEC) in a 3-2 decision voted to propose amendments to rules governing shareholder proposals in companies’ proxy statements.  These proposed amendments – which seek to revise Rule 14a-8’s eligibility requirements, one-proposal limit, and resubmission thresholds – follow on the heels of recent guidance issued by the Staff of the Division of Corporation Finance related to the no-action letter process for shareholder proposals.

The press release announcing the proposed changes noted that the changes are part of the SEC’s ongoing focus on improving proxy access and the ability of shareholders to exercise their rights to vote. SEC Chairman Jay Clayton commented in the release that the proposed changes are designed to “facilitate constructive engagement by long-term shareholders in a manner that would benefit all shareholders and our public capital markets.”  Not without controversy though, the rule revisions are receiving criticism from shareholder advocacy groups, while business-minded groups like the U.S. Chamber of Commerce have come out in support of the proposed changes.

Eligibility Requirements for Shareholders

The current eligibility requirements require that a shareholder proponent hold at least $2,000 or 1% of a company’s securities for at least a year to be eligible to submit a proposal.  The proposed revisions, eliminate the 1% threshold and replace the $2,000 threshold with the following three alternatives:


Continue Reading SEC Proposes to Modernize Shareholder Proposal Thresholds and Certain Procedural Elements of Rule 14a-8

Register for the Corporate & Securities Counsel Public Company Forum on December 12Bass, Berry & Sims invites you to join us for our inaugural Corporate & Securities Counsel Public Company Forum on Thursday, December 12.

This half-day program will feature timely and practical guidance on the latest developments in corporate and securities matters impacting public company in-house counsel.

Panel discussion topics will include:

  • Upcoming proxy season
  • Financial

It’s not too often we see Dick Clark and Ryan Seacrest mentioned in SEC comments, so this recent SEC comment letter issued to Planet Fitness caught our attention.  The Staff’s letter to Planet Fitness indicates that it performed a full review on the company’s Annual Report on Form 10-K, which included its definitive proxy statement incorporated by reference.

(You can tell it was a full review (legal and accounting) because the first sentence of the letter says, “We have reviewed your filing and have the following comments.”  In contrast, a limited review (or monitor) would have said something like “We have limited our review of your filing to the financial statements and related disclosures and have the following comments.”)


Continue Reading “Dick Clark’s Rockin’ Eve with Ryan Seacrest” Gets a Billion TV Viewers? SEC Staff Says Prove It

Advance Notice Bylaw Provisions

A recent Delaware case, Saba Capital Master Fund, Ltd. v. Blackrock Credit Allocation Income Trust, highlights the importance of advance notice bylaws and the careful application of the terms of such bylaws by public companies who may be subject to activist campaigns.

As backdrop, following Delaware cases in 2008 (Jana Master Fund Ltd. vs. CNET Networks, Inc. and Levitt Corp. vs. Office Depot, Inc.) which interpreted ambiguous advance notice bylaw provisions in favor of insurgent shareholders attempting to nominate their own slate of director nominees, a large number of public companies (particularly large-cap companies and public companies incorporated in Delaware) amended their advance notice bylaw provisions to eliminate perceived vulnerabilities in their advance notice bylaws and expand the information required to be provided by shareholder proponents (known as second generation advance notice bylaw provisions).

While the focus on advance notice bylaw provisions (including the law firm commentary on this subject) has waned over the last decade, advance notice bylaws remain an important aspect of a public company’s preparedness for shareholder activism.


Continue Reading Revisiting Advance Notice Bylaw Provisions and Proxy Access

As it is proxy season for calendar year companies, many of which are filing preliminary proxy statements that are subject to screening by the SEC Staff, I thought it might be helpful to publish answers to a few common questions about this process.

  • Is preliminary proxy screening different from other filings?

    Yes, in my experience the screening process for preliminary proxies is a little different than the process for a review of registered transactions. For registration statements, the Staff will call you at some point with a screening decision because in most cases they will need to take the filing effective, which requires more interaction between you and the Staff (i.e., acceleration request, etc.)   In comparison, if you file a preliminary proxy and you have not heard from the Staff within 10 calendar days from the date of your filing, you are free to file the definitive proxy, print and mail at that point—you don’t have to call the Staff to confirm that they are not going to review the filing.


    Continue Reading 5 FAQs on Proxy Screening Procedures

I recently provided insight for an article published in Compliance Week on the SEC’s pay ratio rule, which will require companies to disclose for the first time in their 2018 proxy statements the ratio between the median annual total compensation of all employees and the annual total compensation of its CEO. While the rule has brought some opposition, companies should still keep an eye out for developments in Washington and the SEC, but should not have unrealistic expectations. As I point out in the article, “given all the dynamics and the make-up of the Commission still evolving, companies should proceed with things the way they are now, with the rule in effect.” While there may be possibilities for some type of alleviation, companies should not rely on that to avoid delaying any adjustments needed to be made in preparation.

Continue Reading SEC’s Controversial Pay Ratio Rule Still Alive and Problematic

ISS and Glass Lewis recently updated their proxy voting guidelines in advance of the 2017 proxy season. The updates to the ISS guidelines will be effective for meetings beginning in February 1, 2017, and the updates to the Glass Lewis guidelines will be effective for meetings beginning in January 1, 2017.

Unlike in certain past years, the revisions to the proxy voting guidelines of ISS and Glass Lewis will not significantly impact the public company corporate governance landscape or impact most public companies.  The changes made to the ISS guidelines include:

  • tightening the overboarding policy of ISS (by lowering the number of public company board positions it considers acceptable for non-CEO directors from six to five),
  • certain technical revisions to ISS guidelines with respect to proposals to amend or approve equity-based compensation plans, and
  • updating the policies of ISS with respect to proposals to address non-employee director compensation.


Continue Reading ISS and Glass Lewis: Proxy Season Preparation