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Federal Register / Vol. 86, No. 228 / Wednesday, December 1, 2021 / Rules and Regulations Table of Contents
SECURITIES AND EXCHANGE
COMMISSION
17 CFR Part 240
Release No. 3493596; IC34419; File No.
S72416
RIN 3235AL84

Universal Proxy Securities and Exchange Commission.
ACTION: Final rule.
AGENCY:

The Securities and Exchange Commission Commission is amending the Federal proxy rules to enhance the ability of shareholders to elect directors though the proxy process in a manner consistent with their ability to vote in person at a shareholder meeting. Specifically, the Commission is requiring the use of a universal proxy card in all non-exempt solicitations involving director election contests, except those involving registered investment companies and business development companies. To facilitate the use of a universal proxy card, the Commission is also amending the Federal proxy rules to establish certain notice, minimum solicitation, filing, formatting and presentation requirements, along with other related rule changes consistent with the adoption of a universal proxy requirement. In addition, the Commission is adopting new disclosure requirements relating to voting standards and further requiring certain voting options for all director elections, whether or not contested.
DATES:
Effective date: The rules are effective January 31, 2022.
Compliance dates: See Section II.K.
FOR FURTHER INFORMATION CONTACT:
Christina Chalk, Senior Special Counsel, or David M. Plattner, Special Counsel, in the Office of Mergers and Acquisitions, at 202 5513440, Division of Corporation Finance, Securities and Exchange Commission, 100 F Street NE, Washington, DC 20549.
SUPPLEMENTARY INFORMATION: We are adopting amendments to 17 CFR
240.14a2 Rule 14a2, 17 CFR
240.14a3 Rule 14a3, 17 CFR
240.14a4 Rule 14a4, 17 CFR
240.14a5 Rule 14a5, 17 CFR
240.14a6 Rule 14a6, and 17 CFR
240.14a101 Schedule 14A, and new rule 17 CFR 240.14a19 Rule 14a19, each under the Securities Exchange Act of 1934 15 U.S.C. 78a et seq. Exchange Act.1

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SUMMARY:

1 Unless otherwise noted, when we refer to the Exchange Act, or any paragraph of the Exchange
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I. Introduction A. Background B. Overview of Final Amendments II. Discussion of Final Amendments A. Mandatory Use of Universal Proxies in Non-Exempt Solicitations in Contested Elections 1. Proposed Rules 2. Comments Received 3. Final Amendments B. Dissidents Notice of Intent To Solicit Proxies in Support of Nominees Other Than the Registrants Nominees 1. Proposed Rules 2. Comments Received 3. Final Amendments C. Registrants Notice of Its Nominees 1. Proposed Rules 2. Comments Received 3. Final Amendments D. Minimum Solicitation Requirement for Dissidents 1. Proposed Rules 2. Comments Received 3. Final Amendments E. Dissidents Requirement To File Definitive Proxy Statement 25 Calendar Days Prior to Meeting 1. Proposed Rules 2. Comments Received 3. Final Amendments F. Access to Information About All Nominees 1. Proposed Rules 2. Comments Received 3. Final Amendments G. Formatting and Presentation of the Universal Proxy Card 1. Proposed Rules 2. Comments Received 3. Final Amendments H. Director Election Voting Standards Disclosure and Voting Options 1. Proposed Rules 2. Comments Received 3. Final Amendments I. Bona Fide Nominee and Short Slate Rules 1. Elimination of the Short Slate Rule a. Proposed Rules b. Comments Received c. Final Amendments 2. Modification of the Bona Fide Nominee Rule a. Proposed Rules b. Comments Received c. Final Amendments J. Funds 1. Proposed Rules 2. Comments Received 3. Final Amendments K. Compliance Dates III. Other Matters IV. Economic Analysis A. Introduction B. Baseline 1. Affected Parties Act, we are referring to 15 U.S.C. 78a of the United States Code, at which the Exchange Act is codified, and when we refer to rules under the Exchange Act, or any paragraph of these rules, we are referring to title 17, part 240 of the Code of Federal Regulations 17 CFR part 240, in which these rules are published.

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a. Shareholders b. Registrants c. Dissidents in Contested Elections d. Directors 2. Contested Director Elections a. Proxy Contest Data b. Notice, Solicitation, and Costs of Proxy Contests c. Results of Proxy Contests d. Split-Ticket Voting 3. Other Methods To Seek Change in Board Representation C. Discussion of Economic Effects 1. Effects on Shareholder Voting 2. Potential Effects on Costs of Contested Elections a. Typical Proxy Contests b. Nominal Proxy Contests 3. Potential Effects on Outcomes of Contested Elections 4. Potential Effects on Incidence and Perceived Threat of Contested Elections a. Typical Proxy Contests b. Nominal Proxy Contests 5. Specific Implementation Choices a. The Short Slate and Bona Fide Nominee Rules b. Use of Universal Proxies c. Voting Standards Disclosure and Voting Options V. Paperwork Reduction Act A. Summary of the Collection of Information B. Effect of the Final Amendments on Existing Collections of Information C. Aggregate Burden and Cost Estimates for the Amendments VI. Final Regulatory Flexibility Act Analysis A. Need for, and Objectives of, the Final Amendments B. Significant Issues Raised by Public Comments C. Small Entities Subject to the Final Amendments D. Projected Reporting, Recordkeeping, and Other Compliance Requirements E. Agency Action to Minimize Effect on Small Entities VII. Statutory Authority
I. Introduction A. Background State statutes require corporations to hold an annual meeting of shareholders for the purpose of electing directors.2 A
shareholders ability to participate in the election of directors is a fundamental right under state corporate law,3 and the process by which directors are elected is a fundamental aspect of corporate governance that is central to maintaining the accountability of directors to shareholders. Today, few shareholders 2 See, e.g., Model Bus. Corp. Act section 7.01
2016; Cal. Corp. Code section 600b; Del. Code.
Ann. tit. 8, section 211b; N.Y. Bus. Corp. Law section 602.
3 See Preston v. Allison, 650 A.2d 646, 649 Del.
1994; see also Blasius Indus., Inc. v. Atlas Corp., 564 A.2d 651, 659 Del. Ch. 1988 The shareholder franchise is the ideological underpinning upon which the legitimacy of directorial power rests..

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