The ABCs of the New Universal Proxy Rule

In November 2021, the Securities and Exchange Commission (SEC) approved a new rule that requires organizations to share proxy cards for contested events. This ruling came into effect on August 31, 2022. Mediant's technology was updated well in advance to ensure clients are compliant with its requirements.

The rule requires that proxy cards feature all director candidates, both those endorsed by the company and those endorsed by the challenger. As a result of this change, all shareholders will be able to cast votes for a combination of nominees across both slates, a privilege previously available only to investors attending meetings in person.

Under the new rule, which was first proposed in 2016, dissidents are required to notify registrants of their intent to solicit proxies and provide the names of their nominees no later than 60 calendar days before the anniversary of the previous year's annual meeting. By contrast, registrants need to provide dissidents with their nominee's names no later than 50 calendar days before the anniversary of that same meeting.

Additionally, the rule requires dissidents to file their definitive statement no later than 25 calendar days before the shareholder meeting or five days after the registrant files its definitive statement, whichever comes first.

At the same time, dissidents now must solicit at least 67% of the voting power of shares entitled to vote on the election of directors, and they need to indicate they intend to comply with this minimum threshold.

The rule also establishes new formatting requirements for both parties, thereby ensuring that each slate of candidates is presented in a manner that's easy for shareholders to understand. Each side will need to distribute their own proxy cards, which can be to their own design so long as they comply with the new formatting requirements.

In addition to these obligations for contested events, the rule change includes the following disclosure requirements that are applicable to all director elections:

• An "against" voting option in director elections when there is a legal effect to vote against a director nominee;
• Proxy cards offering shareholders the option to "abstain" in an election where a majority voting standard applies (instead of "withhold"); and
• A proxy statement disclosure about the effect of a "withhold" vote.

While this new rule contains a lot to digest, the updates to Mediant's technology mean our solutions fully support all these requirements. As such, Mediant clients can feel assured that they're in compliance.

Do you have questions about the Universal Proxy rule change? If so, contact us.