General Rules and Regulations
Securities Exchange Act of 1934
Rule 14a-8 -- Proposals of Security Holders
This section addresses when a company must include a shareholder's proposal in
its proxy statement and identify the proposal in its form of proxy when the company
holds an annual or special meeting of shareholders. In summary, in order to have
your shareholder proposal included on a company's proxy card, and included along
with any supporting statement in its proxy statement, you must be eligible and
follow certain procedures. Under a few specific circumstances, the company is
permitted to exclude your proposal, but only after submitting its reasons to the
Commission. We structured this section in a question-and- answer format so that
it is easier to understand. The references to "you" are to a shareholder
seeking to submit the proposal.
Question 1: What is a proposal? A shareholder proposal
is your recommendation or requirement that the company and/or its board of directors
take action, which you intend to present at a meeting of the company's shareholders.
Your proposal should state as clearly as possible the course of action that you
believe the company should follow. If your proposal is placed on the company's
proxy card, the company must also provide in the form of proxy means for shareholders
to specify by boxes a choice between approval or disapproval, or abstention. Unless
otherwise indicated, the word "proposal" as used in this section refers
both to your proposal, and to your corresponding statement in support of your
proposal (if any).
Question 2: Who is eligible to submit a proposal,
and how do I demonstrate to the company that I am eligible?
In order to be eligible to submit a proposal, you
must have continuously held at least $2,000 in market value, or 1%, of the company's
securities entitled to be voted on the proposal at the meeting for at least one
year by the date you submit the proposal. You must continue to hold those securities
through the date of the meeting.
If you are the registered holder of your securities,
which means that your name appears in the company's records as a shareholder,
the company can verify your eligibility on its own, although you will still have
to provide the company with a written statement that you intend to continue to
hold the securities through the date of the meeting of shareholders. However,
if like many shareholders you are not a registered holder, the company likely
does not know that you are a shareholder, or how many shares you own. In this
case, at the time you submit your proposal, you must prove your eligibility to
the company in one of two ways:
The first way is to submit to the company a written
statement from the "record" holder of your securities (usually a broker
or bank) verifying that, at the time you submitted your proposal, you continuously
held the securities for at least one year. You must also include your own written
statement that you intend to continue to hold the securities through the date
of the meeting of shareholders; or
The second way to prove ownership applies only
if you have filed a Schedule 13D, Schedule
13G, Form 3, Form
4 and/or Form 5, or amendments to those
documents or updated forms, reflecting your ownership of the shares as of or before
the date on which the one-year eligibility period begins. If you have filed one
of these documents with the SEC, you may demonstrate your eligibility by submitting
to the company:
A copy of the schedule and/or form, and any
subsequent amendments reporting a change in your ownership level;
Your written statement that you continuously
held the required number of shares for the one-year period as of the date of the
Your written statement that you intend to
continue ownership of the shares through the date of the company's annual or special
Question 3: How many proposals may I submit: Each
shareholder may submit no more than one proposal to a company for a particular
Question 4: How long can my proposal be? The proposal,
including any accompanying supporting statement, may not exceed 500 words.
Question 5: What is the deadline for submitting a
If you are submitting your proposal for the company's annual meeting, you can in most cases find
the deadline in last year's proxy statement. However, if the company did not hold an annual meeting last year, or has changed the date
of its meeting for this year more than 30 days from last year's meeting, you can usually find the deadline in one of the company's
quarterly reports on Form 10-Q, or in shareholder reports of investment companies under Rule 270.30d-1 of this chapter of the Investment
Company Act of 1940. In order to avoid controversy, shareholders should submit their proposals by means, including electronic means, that permit them to prove the date
The deadline is calculated in the following manner
if the proposal is submitted for a regularly scheduled annual meeting. The proposal
must be received at the company's principal executive offices not less than 120
calendar days before the date of the company's proxy statement released to shareholders
in connection with the previous year's annual meeting. However, if the company
did not hold an annual meeting the previous year, or if the date of this year's
annual meeting has been changed by more than 30 days from the date of the previous
year's meeting, then the deadline is a reasonable time before the company begins
to print and send its proxy materials.
If you are submitting your proposal for a meeting
of shareholders other than a regularly scheduled annual meeting, the deadline
is a reasonable time before the company begins to print and send its proxy materials.
Question 6: What if I fail to follow one of the eligibility
or procedural requirements explained in answers to Questions 1 through 4 of this
The company may exclude your proposal, but only
after it has notified you of the problem, and you have failed adequately to correct
it. Within 14 calendar days of receiving your proposal, the company must notify
you in writing of any procedural or eligibility deficiencies, as well as of the
time frame for your response. Your response must be postmarked, or transmitted
electronically, no later than 14 days from the date you received the company's
notification. A company need not provide you such notice of a deficiency if the
deficiency cannot be remedied, such as if you fail to submit a proposal by the
company's properly determined deadline. If the company intends to exclude the
proposal, it will later have to make a submission under Rule 14a-8 and provide
you with a copy under Question 10 below, Rule 14a-8(j).
If you fail in your promise to hold the required
number of securities through the date of the meeting of shareholders, then the
company will be permitted to exclude all of your proposals from its proxy materials
for any meeting held in the following two calendar years.
Question 7: Who has the burden of persuading the
Commission or its staff that my proposal can be excluded? Except as otherwise
noted, the burden is on the company to demonstrate that it is entitled to exclude
Question 8: Must I appear personally at the shareholders'
meeting to present the proposal?
Either you, or your representative who is qualified
under state law to present the proposal on your behalf, must attend the meeting
to present the proposal. Whether you attend the meeting yourself or send a qualified
representative to the meeting in your place, you should make sure that you, or
your representative, follow the proper state law procedures for attending the
meeting and/or presenting your proposal.
If the company holds it shareholder meeting in
whole or in part via electronic media, and the company permits you or your representative
to present your proposal via such media, then you may appear through electronic
media rather than traveling to the meeting to appear in person.
If you or your qualified representative fail to
appear and present the proposal, without good cause, the company will be permitted
to exclude all of your proposals from its proxy materials for any meetings held
in the following two calendar years.
Question 9: If I have complied with the procedural
requirements, on what other bases may a company rely to exclude my proposal?
Improper under state law: If the proposal is not
a proper subject for action by shareholders under the laws of the jurisdiction
of the company's organization;
Not to paragraph (i)(1)
Depending on the subject matter, some proposals are not considered proper under
state law if they would be binding on the company if approved by shareholders.
In our experience, most proposals that are cast as recommendations or requests
that the board of directors take specified action are proper under state law.
Accordingly, we will assume that a proposal drafted as a recommendation or suggestion
is proper unless the company demonstrates otherwise.
Violation of law: If the proposal would, if implemented,
cause the company to violate any state, federal, or foreign law to which it is
Not to paragraph (i)(2)
Note to paragraph (i)(2): We will not apply this basis for exclusion to permit
exclusion of a proposal on grounds that it would violate foreign law if compliance
with the foreign law could result in a violation of any state or federal law.
Violation of proxy rules: If the proposal or supporting
statement is contrary to any of the Commission's proxy rules, including Rule
14a-9, which prohibits materially false or misleading statements in proxy
Personal grievance; special interest: If the proposal
relates to the redress of a personal claim or grievance against the company or
any other person, or if it is designed to result in a benefit to you, or to further
a personal interest, which is not shared by the other shareholders at large;
Relevance: If the proposal relates to operations
which account for less than 5 percent of the company's total assets at the end
of its most recent fiscal year, and for less than 5 percent of its net earning
sand gross sales for its most recent fiscal year, and is not otherwise significantly
related to the company's business;
Absence of power/authority: If the company would
lack the power or authority to implement the proposal;
Management functions: If the proposal deals with
a matter relating to the company's ordinary business operations;
Relates to election: If the proposal relates to a nomination or an election for membership on the company's
board of directors or analogous governing body or a procedure for such nomination or election;
Conflicts with company's proposal: If the proposal
directly conflicts with one of the company's own proposals to be submitted to
shareholders at the same meeting.
Note to paragraph (i)(9)
Note to paragraph (i)(9): A company's submission to the Commission under this
section should specify the points of conflict with the company's proposal.
Substantially implemented: If the company has
already substantially implemented the proposal;
Duplication: If the proposal substantially duplicates
another proposal previously submitted to the company by another proponent that
will be included in the company's proxy materials for the same meeting;
Resubmissions: If the proposal deals with substantially
the same subject matter as another proposal or proposals that has or have been
previously included in the company's proxy materials within the preceding 5 calendar
years, a company may exclude it from its proxy materials for any meeting held
within 3 calendar years of the last time it was included if the proposal received:
Less than 3% of the vote if proposed once within
the preceding 5 calendar years;
Less than 6% of the vote on its last submission
to shareholders if proposed twice previously within the preceding 5 calendar years;
Less than 10% of the vote on its last submission
to shareholders if proposed three times or more previously within the preceding
5 calendar years; and
Specific amount of dividends: If the proposal
relates to specific amounts of cash or stock dividends.
Question 10: What procedures must the company follow
if it intends to exclude my proposal?
If the company intends to exclude a proposal from
its proxy materials, it must file its reasons with the Commission no later than
80 calendar days before it files its definitive proxy statement and form of proxy
with the Commission. The company must simultaneously provide you with a copy of
its submission. The Commission staff may permit the company to make its submission
later than 80 days before the company files its definitive proxy statement and
form of proxy, if the company demonstrates good cause for missing the deadline.
The company must file six paper copies of the following:
An explanation of why the company believes that
it may exclude the proposal, which should, if possible, refer to the most recent
applicable authority, such as prior Division letters issued under the rule; and
A supporting opinion of counsel when such reasons
are based on matters of state or foreign law.
Question 11: May I submit my own statement to the
Commission responding to the company's arguments?
Yes, you may submit a response, but it is not required. You should try to submit
any response to us, with a copy to the company, as soon as possible after the
company makes its submission. This way, the Commission staff will have time to
consider fully your submission before it issues its response. You should submit
six paper copies of your response.
Question 12: If the company includes my shareholder
proposal in its proxy materials, what information about me must it include along
with the proposal itself?
The company's proxy statement must include your
name and address, as well as the number of the company's voting securities that
you hold. However, instead of providing that information, the company may instead
include a statement that it will provide the information to shareholders promptly
upon receiving an oral or written request.
The company is not responsible for the contents
of your proposal or supporting statement.
Question 13: What can I do if the company includes
in its proxy statement reasons why it believes shareholders should not vote in
favor of my proposal, and I disagree with some of its statements?
The company may elect to include in its proxy statement
reasons why it believes shareholders should vote against your proposal. The company
is allowed to make arguments reflecting its own point of view, just as you may
express your own point of view in your proposal's supporting statement.
However, if you believe that the company's opposition
to your proposal contains materially false or misleading statements that may violate
our anti- fraud rule, Rule 14a-9, you should promptly
send to the Commission staff and the company a letter explaining the reasons for
your view, along with a copy of the company's statements opposing your proposal.
To the extent possible, your letter should include specific factual information
demonstrating the inaccuracy of the company's claims. Time permitting, you may
wish to try to work out your differences with the company by yourself before contacting
the Commission staff.
We require the company to send you a copy of its
statements opposing your proposal before it sends its proxy materials, so that
you may bring to our attention any materially false or misleading statements,
under the following timeframes:
If our no-action response requires that you make
revisions to your proposal or supporting statement as a condition to requiring
the company to include it in its proxy materials, then the company must provide
you with a copy of its opposition statements no later than 5 calendar days after
the company receives a copy of your revised proposal; or
In all other cases, the company must provide
you with a copy of its opposition statements no later than 30 calendar days before
its files definitive copies of its proxy statement and form of proxy under Rule
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