On November 1, 2017, the staff of the SEC’s Division of Corporation Finance issued Staff Legal Bulletin No. 14I (CF), which provides new guidance on the excludability of shareholder proposals under Exchange Act Rule 14a-8. The new guidance sets forth a revised framework for analyzing no-action requests under Rule 14a-8(i)(5) (the “economic relevance” exception), which should expand that exclusion’s availability. In addition, in no-action requests under Rule 14a-8(i)(5) and Rule 14a-8(i)(7) (the “ordinary business” exception) in which the significance of the proposal to the company’s business is at issue, the Division Staff would expect to see a well-developed discussion of the board’s analysis of the proposal and its significance to the company’s business. SLB No. 14I suggests that the Division Staff will give some deference to a board’s well-informed and well-reasoned analysis. Finally, the new guidance outlines enhanced information requirements for “proposals by proxy” and clarifies when graphs or images may render a proposal excludable. This Sidley Update includes a table summarizing the new guidance in SLB No. 14I.
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