The Securities and Exchange Commission has posted some must-read guidance for companies preparing for the upcoming proxy season.The Division of Corporation Finance staff has posted a legal bulletin providing guidance on common issues related to shareholder proposals under Rule 14a-8 of the Securities Exchange Act of 1934, which governs when a company must include a shareholder’s proposal in its proxy statement.

Among other things, the Nov. 7 staff legal bulletin notes that the SEC has established a new e-mail address, shareholderproposals@sec.gov, specifically for the receipt of rule 14a-8 no-action requests and related correspondence.

The bulletin clarifies that, if a proposal recommends, requests, or requires the board of directors to amend the company’s charter, the staff may concur that there is some basis for the company to omit the proposal if the company meets its burden of establishing that applicable state law requires any such amendment to be initiated by the board and then approved by shareholders in order for the charter to be amended as a matter of law. However, in accordance with longstanding practice, the staff response may permit the proponent to revise the proposal to provide that the board of directors “take the steps necessary” to amend the company’s charter. If the proponent revises the proposal within the time frame specified in the staff’s response letter, “we do not believe there would be a basis for the company to exclude the proposal under rule 14a-8(i)(1), rule 14a-8(i)(2), or rule 14a-8(i)(6)” the staff states. The bulletin includes a chart with examples of revisions that the staff has previously permitted.

The SLB also clarifies that, if a proponent is listed in a company’s records as a registered holder, and the records indicate that the proponent hasn’t owned the minimum amount of securities for the required period as set forth in rule 14a-8(b), the company must send the proponent a notice of defect if it wishes to exclude the proposal on eligibility grounds. The staff explained that because the proponent can hold the company’s securities by other means, the company’s records don’t prove conclusively that the proponent fails to meet the ownership eligibility requirement.

As a result, in situations where a company’s records indicate that the proponent doesn't satisfy the ownership eligibility requirement in rule 14a-8(b), the company “must inform the proponent that the proponent must provide proof of ownership that satisfies the requirements of rule 14a-8(b) if the company intends to exclude the proposal based upon the proponent’s failure to satisfy the requirements of rule 14a-8(b),” the bulletin states.

Finally, the bulletin clarifies that proponents are required to provide companies with any correspondence they send to the staff in connection with rule 14a-8 no-action requests and encourages companies and proponents to use the same means of transmitting correspondence to each other that they use to transmit materials to the staff.

At the same time, the SEC has added a page on the Corp Fin Web site that contains Rule 14a-8 no-action requests received after Oct. 1, 2008, that are being reviewed by the staff.

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