The SEC’s New Universal E-Proxy Rules

The SEC’s New Universal E-Proxy Rules
August 8, 2007
The SEC’s New Universal E-Proxy Rules
The SEC has published final rules requiring that companies and soliciting persons offer
the notice and access method of distribution for all proxy solicitations (other than with respect to
business combinations) (the “universal e-proxy rules”). After the new rules go into effect,
companies and other soliciting persons may elect to use either a notice only or a full set delivery
option to distribute proxy materials to shareholders. Under both options, companies and other
soliciting persons must deliver to shareholders a Notice of Internet Availability of Proxy Materials
in the form specified by the SEC (the “Notice”) and post proxy materials on a publicly accessible
website. Under the full set delivery option, companies and other soliciting persons may also
initially provide paper or e-mail copies of proxy materials in addition to the Notice and website
posting. Companies and soliciting persons do not have to choose one option as the exclusive
means for providing proxy materials to shareholders. Instead, they may use one option for some
shareholders and the other option for other shareholders.
Large accelerated filers (other than registered investment companies) must comply with
the universal e-proxy rules for solicitations commencing on or after January 1, 2008. Registered
investment companies, soliciting persons other than the company and non-large accelerated filers
(i) may comply with these rules for solicitations commencing on or after January 1, 2008, and (ii)
must comply with these rules for solicitations commencing on or after January 1, 2009. To view
the final universal e-proxy rules, see http://sec.gov/rules/final/2007/34-56135.pdf.
The Notice Only Option
Companies and other soliciting persons who choose the notice only option will follow the
same process that was approved by the SEC earlier this year when it adopted the voluntary version
of these e-proxy requirements. The only differences between the existing e-proxy procedure and
the new notice only option under the universal e-proxy rules are certain technical clarifications
made by the SEC based on comments received to date, including the following:
•
The requirement that the Notice include a “clear and impartial identification of each
separate matter intended to be acted on and the soliciting person’s recommendation
regarding those matters” is not a requirement that a recommendation be made for every
matter, but only that disclosure is required where the company or other soliciting person
chooses to make a recommendation; and
1285 Avenue of the Americas
New York, New York 10019-6064
(212) 373-3000
1615 L Street, NW
Washington, DC 20036-5694
(202) 223-7300
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Chiyoda-ku, Tokyo 100-001, Japan
(81-3) 3597-8101
Unit 3601, Fortune Plaza Office Tower A
No. 7 Dong Sanhuan Zhonglu
Chao Yang District, Beijing 100020
People's Republic of China
(86-10) 5828-6300
12th Fl., Hong Kong Club Building
3A Chater Road, Central
Hong Kong
(852) 2536-9933
© 2007 Paul, Weiss, Rifkind, Wharton & Garrison LLP. In some jurisdictions, this advisory may be considered attorney advertising.
Past representations are no guarantee of future outcomes.
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•
Requests for paper copies of proxy materials received after the end of a shareholder
meeting need not be fulfilled via first-class mail or within three business days.
For more detail on the notice only option, see Exhibit A.
Full Set Delivery Option
For companies wishing to initially furnish a full set of proxy materials in paper to
shareholders under the full set delivery option, the only new obligations that these rules add to the
current paper or e-mail delivery process are requirements to post the proxy materials on a website
and include a Notice with (or incorporate the Notice into) the full sets of materials. The
requirements for the Notice and website posting are the same as those in the notice only option
except as follows:
•
A company may accompany the Notice with a copy of the proxy statement, annual report
(if required by Rule 14a-3(b)) and a proxy card;
•
A company need not prepare a separate Notice if it incorporates all of the Notice
information into the proxy statement and proxy card;
•
Because shareholders will not need extra time to request paper or e-mail copies, the
company need not send the Notice and full set of proxy materials at least 40 days before
the meeting date. Also, because under current rules the company does not have to post
proxy materials on the specified website until the date that they are sent to shareholders,
the company would also not be required to post the materials on a public website at least
40 days before the meeting date if they are not sent then;
•
Because the company already has provided shareholders with a full set of proxy materials,
it need not provide the shareholder with copies of proxy materials upon request;
•
Because the full set of proxy materials includes a proxy card or request for voting
instructions, the company need not provide another means for voting at the time the
Notice is provided unless it chooses to do so; and
•
The company need not include the part of the prescribed legend relating to shareholder
requests for copies of the documents and instructions on how to request a copy of the
proxy materials in its notice of internet availability.
Other soliciting persons and intermediaries follow a similar process as companies when using the
full set delivery option.
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This memorandum is not intended to provide legal advice, and no legal or business
decision should be based on its content. Questions concerning issues addressed in this
memorandum may be directed to John C. Kennedy (212) 373-3025 or Raphael M. Russo (212)
373-3309.
1
EXHIBIT A
THE NOTICE ONLY OPTION
Content and Delivery of the Notice of Internet Availability of Proxy Materials
Companies must send a Notice of Internet Availability of Proxy Materials (a
“Notice”) to its shareholders at least 40 calendar days before the date of the applicable
shareholder meeting or shareholder action, if there is no meeting. The Notice constitutes
“other soliciting material” that must be filed with the SEC no later than the date on which it is
first sent to shareholders. The information that must be included in the Notice is as follows:
•
A prominent legend in bold-face type that states:
“Important Notice Regarding the Availability of Proxy Materials for the
Shareholder Meeting to Be Held on [insert meeting date].
•
This communication presents only an overview of the more
complete proxy materials that are available to you on the
Internet. We encourage you to access and review all of the
important information contained in the proxy materials before
voting.
•
The [proxy statement/information statement/annual report to
security holders] [is/are] available at [insert website address].
•
If you want to receive a paper or e-mail copy of these documents,
you must request one. There is no charge to you for requesting a
copy. Please make your request for a copy as instructed below on
or before [insert a date] to facilitate timely delivery”;
•
The date, time and location of the meeting, or if corporate action is to be
taken by written consent, the earliest date on which the corporate action may
be effected;
•
Clear and impartial identification of each separate matter intended to be acted
on and the soliciting person’s recommendations, if any, regarding those
matters, but no supporting statements;
•
A list of the materials being made available at the specified website;
•
A toll-free telephone number, e-mail address and Internet website where a
shareholder can request paper or e-mail copies of the proxy materials for the
current and all future shareholder meetings;
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•
Control/identification numbers that the shareholder needs to access his or her
proxy card;
•
Instructions on how to access the proxy card; provided that such instructions
do not enable a shareholder to execute a proxy without having access to the
related proxy materials. For instance, the Notice may not include a telephone
number or any other means that would allow shareholders to execute their
proxy without accessing the related proxy materials. Such a telephone
number may, however, be included on companies’ websites that include
access to the proxy materials or on a proxy card that is sent to shareholders
ten days after the Notice is initially sent; and
•
Information on how to obtain directions to attend the meeting and vote in
person.
No additional information or changes are permitted in the Notice other than:
•
Information that is required to be included in a notice of shareholder meeting
by state law, unless state law prohibits such incorporation or combination;
•
Revisions to reflect the fact that the Notice relates to a consent solicitation or
an information statement, if that is the case;
•
A statement to educate shareholders that no personal information other than
the identification or control number is necessary to execute a proxy; and
•
Pictures, logos or similar design elements as long as the design is not
misleading and the required information is clear.
Plain English principles must be used in drafting the Notice.
So that the Notice will receive proper attention, no materials may accompany the
Notice, except for any state-law mandated shareholder meeting notices or a reply card for
shareholders to request paper or e-mail copies of proxy materials in lieu of Internet delivery.
Companies may not include a form of proxy with the Notice. Ten days after the initial
delivery of the Notice, companies may send a proxy card if it is accompanied or preceded by
a copy of the proxy statement and annual report or accompanied by another copy of the
Notice, in the same medium.
The Notice may be sent by mail or e-mail, subject to certain conditions, including
shareholder consent to electronic delivery of such communications. Companies may also
“household” the Notice pursuant to the conditions set forth in Rule 14a-3(e), meaning they
may send a single copy to members of the same household. Companies do not have to
resolicit the consent of shareholders in order to household the Notice.
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Internet Posting of Proxy Materials
Companies must post all proxy materials on the website specified in the Notice by
the time they first send the Notice to shareholders, which, as discussed above, must be at
least 40 calendar days before the date of the applicable shareholder meeting or shareholder
action, if there is no meeting. Additional soliciting materials used after the Notice is sent
must be posted on the specified website no later than the day on which those materials are
first sent to shareholders. Other conditions regarding the posting of these materials include
the following:
•
•
The website that companies use to furnish proxy materials electronically:
•
Cannot be the SEC’s EDGAR site;
•
Must have a specific enough address (as disclosed in the Notice) to lead
shareholders directly to the proxy materials, although it may be a central site
with prominent links to the applicable materials; and
•
Must preserve the anonymity of shareholders accessing the proxy materials.
So, for instance, other than tracking shareholders for the purpose of
validating election results, the identity of shareholders may not be tracked,
and companies may not require the installation of any “cookies” or other
software that collects information about shareholders.
The proxy materials posted:
•
Must be publicly accessible, free of charge at the specified website not later
than the time that the Notice is sent to shareholders and must remain
available through the conclusion of the applicable shareholder meeting or
action;
•
Must be substantially identical to the paper version of the materials;
•
Must be presented in a format or formats convenient for both printing and
viewing online. If additional software is needed to view the materials, the
website must contain a link to obtain the software free of charge; and
•
Must, according to the promulgating release, be presented in a readily
searchable format and may incorporate additional user-friendly features, such
as hyperlinks to allow shareholders to easily navigate through the document.
Note that existing filing requirements for proxy materials under Rules 14a-6 (for
proxy solicitations), 14c-5 (for information statements) and 14c-3 (for annual reports to
shareholders) continue to apply. Companies must comply with these requirements by the
time they post proxy materials on the applicable website.
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Shareholder Opt Out of the Notice Only Option
Shareholders may request paper or e-mail copies of proxy materials at any time upon
request to the company. Companies must then send copies of such materials free of charge by
U.S. first class mail or other reasonably prompt means or by e-mail, as requested, within
three business days after receipt of the request, unless such request is received after the end of
the relevant meeting, in which case such first class mail and three business day requirements
do not apply. A request for paper or e-mail copies of proxy materials will remain in effect
until revoked by the shareholders, and companies are required to maintain a record of such
requests for all future solicitations.
In the SEC’s view, shareholders bear the responsibility to make timely requests for
paper or e-mail copies. To assist shareholders in this process, companies must include in the
Notice a suggested date by which a copy of the materials should be requested to ensure
timely receipt and review of the materials and execution of the proxy or vote. However,
notwithstanding such date, shareholders may request paper or e-mail copies of proxy
materials at any time for up to one year after the conclusion of the meeting or action to which
those materials relate.
To protect shareholders’ privacy, companies may not transfer to any person (other
than an employee or agent in connection with the distribution of proxy materials) shareholder
e-mail addresses collected for the purpose of sending proxy materials, and may not use such
e-mail addresses for any purpose other than to send copies of proxy materials.
Finally, to assist companies in gauging how many paper copies of proxy materials
will be needed to meet shareholder requests, the proposing release states that issuers may
send shareholders a communication before a proxy solicitation to determine their interest in
receiving paper copies.
Other Soliciting Persons
The procedures for soliciting persons are substantially similar to those for companies,
except as follows:
•
Because soliciting persons may choose not to initiate an opposing solicitation until
after the company has filed its proxy statement, soliciting persons other than the
company may send out their Notices by the later of (i) 40 calendar days before the
shareholder meeting or action and (ii) ten calendar days after the company first sends
its proxy statement or Notice to shareholders.
•
Soliciting persons’ Notices need only include those meeting agenda items known by
them at the time the Notices are sent to shareholders.
•
Soliciting persons’ Notices must indicate clearly whether the execution of a proxy on
their behalf will invalidate shareholders’ earlier vote or proxy.
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Soliciting persons may continue to target their proxy solicitations by choosing those
shareholders from whom they wish to solicit proxies, and are not required to send proxy
materials to the entire shareholder base. Soliciting persons must send copies of the proxy
materials to any requesting shareholder to whom they sent a Notice.
When providing shareholder lists to a requesting shareholder, companies must
indicate which shareholders have permanently requested paper or e-mail copies of proxy
materials, but is not required to disclose shareholders’ e-mail addresses.
Intermediaries
Companies and other soliciting persons must provide the intermediary with the
information necessary to prepare its own Notice, with sufficient time for the intermediary to
send its Notice to beneficial owners (i) at least 40 calendar days before the shareholder
meeting or action, for company solicitations, or (ii) the later of 40 calendar days before the
shareholder meeting or action and ten calendar days after the date that the company first
sends its proxy statement or Notice to shareholders, for solicitations by other persons.
Because the SEC anticipates that there will be significant coordination between the
intermediaries and companies and soliciting persons in this regard, the SEC did not specify a
time frame for timely delivery of information to the intermediary.
The intermediary procedure is substantially similar to that for companies, with
changes primarily to reflect the intermediary/beneficial owner relationship, such as the
following:
•
The form of Notice includes changes to reflect the fact that shareholders are
providing voting instructions to the intermediary instead of executing a proxy or
voting directly with the company;
•
The intermediary may direct beneficial owners to the company’s website or to its
own website to access the proxy materials; and
•
Shareholders may not request paper or e-mail copies of proxy materials directly from
the company, but must send the request to the intermediary. Upon receipt of a request
from a shareholder for paper or e-mail copies, the intermediary must, within three
business days, relay such request to the company. Thereafter, the company has three
business days to provide the materials to the intermediary, and the intermediary has
another three business days after receipt thereof to provide the materials to the
shareholder.
Intermediaries must clarify that a permanent election to receive paper or e-mail
copies of proxy materials will apply to all securities in the requesting shareholder’s account.
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