The SEC has adopted amendments to its proxy rules which change the way in which proxy materials are to be delivered to shareholders. The amendments allow a company to select either one of the following options to provide proxy materials to shareholders: (i) the “notice only option” and (ii) the “full set delivery option.”

Under the notice only option, the company must post its proxy materials on an Internet website and send a Notice to shareholders to inform them of the electronic availability of the proxy materials at least 40 days before the shareholders’ meeting. If a company follows this option, it must respond to shareholder requests for copies (to be provided without charge), including a shareholder’s permanent request for paper or e-mail copies of proxy materials for all future shareholder meetings. See “Notice Only Option."

Under the full set delivery option, a company must deliver a full set of its proxy materials to shareholders, along with a modified version of the Notice. A company need not prepare and deliver a separate Notice if it incorporates all of the information required to appear in the Notice into its proxy statement and proxy card, and it need not respond to requests for copies as required under the notice only option.  See “Full Set Delivery Option."

A company does not have to choose one option or the other as the exclusive means for providing proxy materials to shareholders. The notice only option may be used to provide proxy materials to some shareholders and the full set delivery option may be used to provide proxy materials to other shareholders.

Intermediaries (e.g., brokers) must follow the amendments when furnishing a company’s proxy materials to beneficial owners (see “Impact on Intermediaries”). Persons conducting their own proxy solicitations (other than the company) must comply with the amendments as well (see “Solicitations By Persons Other Than the Company"). 

The amendments do not apply to a proxy solicitation related to a business combination transaction. 

The notice only option does not apply if the law of the company’s state of incorporation prohibits a company from furnishing proxy materials in the manner specified in this option. For example, if the state in which a company is incorporated requires notices of shareholder meetings and proxy materials to be transmitted directly to shareholders in paper, the notice only option does not provide the company with an option to satisfy its state law obligations by posting those materials on a website. 

“Large accelerated filers,” must comply with the new rules on or after January 1, 2008. Companies that are not large accelerated filers (i) may comply on or after January 1, 2008 and (ii) must comply on or after January 1, 2009. A large accelerated filer, as defined in Exchange Act Rule 12b-2, is:

• a company that, as of the end of its fiscal year, has an aggregate worldwide market value of the voting and non-voting common equity held by its non-affiliates of $700 million or more, as measured on the last business day of the company’s most recently completed second fiscal quarter;
• has been subject to the requirements of Section 13(a) or 15(d) of the Exchange Act for a period of at least twelve calendar months;
• has filed at least one annual report pursuant to Section 13(a) or 15(d) of the Exchange Act; and
• is not eligible to use Forms 10-KSB and 10-QSB for its annual and quarterly reports.

To view or download information related to this alert, click on "Download PDF"

This alert has been prepared by Hinshaw & Culbertson LLP to provide information on recent legal developments of interest to our readers. It is not intended to provide legal advice for a specific situation or to create an attorney-client relationship.