On September 23, 2020, the SEC amended its rules specifying the submission and resubmission thresholds for shareholder proposals. The SEC has characterized the amendments as “modernizing” the rules; the submission and resubmission thresholds had not been amended since 1998 and 1954, respectively. However, investors, which largely opposed the amendments when first proposed, have found the amendments objectionable as throwbacks to an era when shareholder democracy was extremely limited.
As amended, the rules will require a first-time proponent to own at least:
- $2,000 of the company’s securities for at least three years;
- $15,000 of the company’s securities for at least two years; or
- $25,000 of the company’s securities for at least one year.
The revised resubmission thresholds will require favorable votes of 5%, 15%, and 25% for matters voted on once, twice, or three or more times in the last five years, respectively, increased from 3%, 6%, and 10%, respectively.
The rules also prohibit aggregating holdings to satisfy the new thresholds; require shareholders using a representative to submit a proposal to provide documentation authorizing the representative to act on the holder’s behalf; and require proponents to meet and engage with the company. Other changes limit a representative’s ability to submit different proposals on behalf of different shareholders.
The new rules will be effective for shareholder meetings held on or after January 1, 2022 – in other words, not for the 2021 proxy season – subject to some transition rules.
Please direct any questions or observations to Gunster securities law and corporate governance practice leader Bob Lamm.
