Proxy season is fast approaching. Whether it is for an annual meeting or special shareholder meeting, clients are always asking how quickly they can schedule a shareholder meeting, or where action is taken by consent, how quickly the company can effectuate such consented upon action. The answer depends on several factors, including whether the meeting is a special or annual meeting, if annual, whether there are any “non-routine” items on the agenda, and whether the company intends to mail out all proxy materials or just a notice of internet availability of such materials. Although I have written about the proxy rules many times, this is the first blog where I drill down and focus on the timeline.
The federal proxy rules can be found in Section 14 of the Securities Exchange Act of 1934 (“Exchange Act”) and the rules promulgated thereunder. The rules apply to any company which has securities registered under Section 12 of the Exchange Act. Section 14 of the Exchange Act and its rules govern the timing and content of information provided to shareholders in connection with annual and special meetings. Related specifically to the timeline for holding a meeting, the relevant rules are Rule 14a-13 (obligations when communicating with beneficial owners); Rule 14a-16 (internet availability of proxy materials); Rule 14a-6 (preliminary proxy filing requirements); and the state law of the company’s domicile.
To bring it together, I’ve included a sample timeline at the end of this blog.
Rule 14a-13 – Obligations when Communicating with Beneficial Owners
Rule 14a-13 sets forth a company’s proxy obligations where shares are held of record by a broker, dealer, voting trustee, bank, association or other nominee. All shares that are held in a brokerage account would be governed by rule 14a-13 and as such all publicly traded companies must comply with this rule.
Rule 14a-13 requires that a company make inquiry to a record holder (i.e. the brokerage firm): (i) whether other persons are the beneficial owners and if so, the number of copies of the proxy or information statement necessary to supply to all such beneficial owners; (ii) in the case of a meeting at which directors are to be elected, the number of copies of the annual report to security holders that the company must provide for distribution to all beneficial owners; (iii) whether the firm has an agent to fulfill company NOBO requests and the name and address of such agent; and (iv) whether the firm is holding securities on behalf of any respondent bank, and if so, the name and address of such bank.
In the same notice, the company must disclose to the record holder (brokerage firm, etc.): (i) whether the company is requesting NOBO information and will distribute proxy materials directly to the beneficial owners on that NOBO list; (ii) the record date; and (iii) optional information about exempt employee benefit plan securities.
A Rule 14a-13 inquiry (often referred to as a “broker check”) must be made at least 20 business days prior to the record date. However, the rule also allows a shorter time period where: (i) it is a special meeting and the 20 business days is impractical, in which case inquiry must be made as many days before the record date as practicable; (ii) the company is filing a 14C information statement and the 20 business days is impracticable, then as many days before the corporate action to which the 14C applies, is practicable; or (iii) such later time as a national securities exchange allows. Although the rule allows for deviations from the 20 business days in some circumstances, this exception should only be used in rare exceptional circumstances and as noted, would never be available for use for an annual meeting.
In practice, a Rule 14a-13 inquiry is generated by broadridge, a transfer agent or registrar or similar third party on a company’s behalf.
Rule 14a-16 – Internet Availability of Proxy Materials
Rule 14a-16 governs a company’s ability to make proxy materials available over the internet, as opposed to printing and mailing, which can be expensive and time consuming. Rule 14a-16 provides that when a company is making proxy materials available over the internet, it must mail a notice to all security holders a minimum of 40 calendar days before the meeting, or if no meeting, before the consents or authorizations may be used to affect the consented upon corporate action.
Moreover, unless a company chooses to follow a “full set delivery option” it must provide record holders (i.e. the banks, brokerage accounts and other nominees referred to in Rule 14a-13) with the rules specified information for inclusion in a “Notice of Internet Availability of Proxy Materials” in sufficient time for such record holder to prepare, print and send (mail or electronically) the notice to beneficial owners at least 40 calendar days prior to the meeting date.
Next week I will fully flesh out the requirements for using the internet availability of proxy materials, including details on the notice contents, website requirements, etc.. but in the meantime, as an aside, the “full set delivery option” means just that – providing a full set of proxy materials (proxy statement, annual report and proxy card) either together with or in lieu of a Notice of Internet Availability of Proxy Materials. Companies that follow a full set delivery option are not bound by the 40 calendar day requirement.
Rule 14a-6 – Proxy Filing Requirements
Rule 14a-6 requires that a preliminary proxy (or 14C information statement) be filed with the SEC at least 10 calendar days prior to filing and mailing definitive proxy materials. However, no preliminary proxy needs to be filed if the filing relates to an annual meeting, or special meeting in lieu of annual meeting, in which the only matters to be acted upon include:
- The election of directors;
- The election, approval or ratification of accountant(s);
- A security holder proposal included pursuant to Rule 14a-8 (see HERE);
- A shareholder nominee for director;
- The approval or ratification of an employee equity compensation plan;
- With respect to an investment company, a proposal to continue an advisory contract;
- With respect to an open-end investment fund, a proposal to increase the number of shares authorized to be issued; and/or
- A Say on Pay vote (see HERE).
The SEC may review and comment on a preliminary proxy, in which case definitive proxy materials would not be filed until the SEC review and comment period is completed.
Earlier this year the SEC issued a C&DI related to the counting of the 10 day period. In particular, “[F]or purposes of calculating the “10 calendar day” period in Rule 14a-6, the date of filing is day one pursuant to Rule 14a-6(k). For example, if the preliminary proxy statement is filed on Friday, October 20, 2023, then Sunday, October 29, 2023, would be day ten for purposes of Rule 14a-6. The registrant may send the definitive proxy statement to security holders starting at 12:01 a.m. on October 30, 2023. The foregoing assumes that the preliminary proxy statement is submitted on or before 5:30 p.m. Eastern Time on October 20, 2023. If the filing is submitted after 5:30 p.m., the 10-day period does not start until the next business day, which would be Monday, October 23, 2023. See Rule 13(a)(2) of Regulation S-T.”
State Law
Each state has specific notice requirements for annual and special meetings of shareholders. Delaware is indicative of most states and requires that a record date be a minimum of 10 and no more than 60 days prior to the meeting.
Sample Timeline
Day 1 – Board sets meeting date, record date and matters to be approved at meeting.
Company notifies transfer agent of board approval and relevant dates and instructs the transfer agent to send out broker dealer inquiries in accordance with Rule 14a-13 (keeping in mind this must be at least 20 business days prior to the record date)
Approximately day 22-25 – File preliminary proxy with SEC if needed (see Rule 14a-6 above) – generally the preliminary proxy is filed approximately 5 days prior to the record date
Approximately Day 29 – Record Date (this will depend on interim weekends and holidays to satisfy the 20-business day requirement of Rule 14a-13);
Day 34 – receive beneficial owner numbers from Broadridge (approximately 5 business days after the record date)
Give print order
Day 38 – printed materials are delivered to Broadridge for mailing
Day 43 – File definitive proxy materials with SEC
Mail definitive proxy materials and Notice of Internet Availability of Proxy Materials if applicable (Broadridge requires 5 days from receipt of printed materials for mailing. If Broadridge is also printing, this time can be shortened a few days)
Day 65- Meeting if not using Internet Availability of Proxy Materials
Day 85 – Meeting if using Internet Availability of Proxy Materials
The Author
Laura Anthony, Esq.
Founding Partner
Anthony, Linder & Cacomanolis
A Corporate and Securities Law Firm
Securities attorney Laura Anthony and her experienced legal team provide ongoing corporate counsel to small and mid-size private companies, public companies as well as private companies going public on the Nasdaq, NYSE American or over-the-counter market, such as the OTCQB and OTCQX. For more than two decades Anthony, Linder & Cacomanolis, PLLC has served clients providing fast, personalized, cutting-edge legal service. The firm’s reputation and relationships provide invaluable resources to clients including introductions to investment bankers, broker-dealers, institutional investors and other strategic alliances. The firm’s focus includes, but is not limited to, compliance with the Securities Act of 1933 offer sale and registration requirements, including private placement transactions under Regulation D and Regulation S and PIPE Transactions, securities token offerings and initial coin offerings, Regulation A/A+ offerings, as well as registration statements on Forms S-1, S-3, S-8 and merger registrations on Form S-4; compliance with the Securities Exchange Act of 1934, including registration on Form 10, reporting on Forms 10-Q, 10-K and 8-K, and 14C Information and 14A Proxy Statements; all forms of going public transactions; mergers and acquisitions including both reverse mergers and forward mergers; applications to and compliance with the corporate governance requirements of securities exchanges including Nasdaq and NYSE American; general corporate; and general contract and business transactions. Ms. Anthony and her firm represent both target and acquiring companies in merger and acquisition transactions, including the preparation of transaction documents such as merger agreements, share exchange agreements, stock purchase agreements, asset purchase agreements and reorganization agreements. The ALC legal team assists Pubcos in complying with the requirements of federal and state securities laws and SROs such as FINRA for 15c2-11 applications, corporate name changes, reverse and forward splits and changes of domicile. Ms. Anthony is also the author of SecuritiesLawBlog.com, the small-cap and middle market’s top source for industry news, and the producer and host of LawCast.com, Corporate Finance in Focus. In addition to many other major metropolitan areas, the firm currently represents clients in New York, Los Angeles, Miami, Boca Raton, West Palm Beach, Atlanta, Phoenix, Scottsdale, Charlotte, Cincinnati, Cleveland, Washington, D.C., Denver, Tampa, Detroit and Dallas.
Ms. Anthony is a member of various professional organizations including the Crowdfunding Professional Association (CfPA), Palm Beach County Bar Association, the Florida Bar Association, the American Bar Association and the ABA committees on Federal Securities Regulations and Private Equity and Venture Capital. She is a supporter of several community charities including the American Red Cross for Palm Beach and Martin Counties, Susan Komen Foundation, Opportunity, Inc., New Hope Charities, the Society of the Four Arts, the Norton Museum of Art, Palm Beach County Zoo Society, the Kravis Center for the Performing Arts and several others.
Ms. Anthony is an honors graduate from Florida State University College of Law and has been practicing law since 1993.
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