SEC Adopts Final Rules on Proxy Access and Facilitation of Nominations of Directors by Shareholders

On August 25, 2010, the Securities and Exchange Commission (“SEC”) adopted final rules to facilitate nominations of directors by shareholders, including so-called “proxy access” rules. As adopted, the rules permit any shareholder or group of shareholders that has owned three percent or more of the company’s voting stock for at least three years to include director nominees in that company’s proxy materials. Shareholders will be entitled to include the greater of one nominee or the number of nominees that represent twenty-five percent of the total number of the company’s directors. As explained in the SEC’s 451-page release, the rules are mandatory and will become effective sixty days after publication in the federal register, though the SEC granted a three-year reprieve to “smaller reporting companies.” The rules fundamentally affect the manner in which directors are elected and deserve close attention.

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