SEC Adopts Amendments To Modernize Shareholder Proposal Rules

In Short

The Situation: In November 2019, the U.S. Securities and Exchange Commission ("SEC") proposed certain amendments to Rule 14a-8 of the Securities Exchange Act of 1934, the rule that permits a qualifying shareholder to include a non-binding proposal in a company's proxy statement.

The Result: On September 23, 2020, the SEC adopted a final rule amending Rule 14a-8 by: (i) imposing heightened eligibility requirements for submitting (or resubmitting) a shareholder proposal; (ii) restricting a person to only one proposal per meeting; and (iii) generally updating procedural requirements.

Looking Ahead: The amendments are expected to ease some of the burdens imposed on public companies by reducing the time and money spent responding to shareholder proposals from low-stakes investors with niche agendas, but companies should monitor how active investors adapt their strategies or exploit the new rules to continue to pressure boards and management to adopt their