On November 3, 2021, the staff of the U.S. Securities and Exchange Commission (SEC) Division of Corporation Finance (the Division Staff) issued Staff Legal Bulletin No. 14L (CF) (SLB No. 14L), which is intended to provide greater clarity to companies and shareholder proponents on the excludability of shareholder proposals under Exchange Act Rule 14a-8. The new guidance offers useful insight into how the Division Staff will evaluate future no-action requests seeking exclusion of shareholder proposals on the basis of Rules 14a-8(i)(7) (the “ordinary business” exception) and 14a-8(i)(5) (the “economic relevance” exception). It will likely result in the exclusion of fewer shareholder proposals, particularly those that raise human capital-related issues that have a broad societal impact (even if not significant to the company) or that request companies to adopt targets and timeframes to address climate change as long as they do not dictate how management must do so.
SLB No. 14L rescinds the most recent Rule 14a-8 guidance provided by the Division Staff in Staff Legal Bulletin No. 14K (CF) (SLB No. 14K), Staff Legal Bulletin No. 14J (CF) (SLB No. 14J) and Staff Legal Bulletin No. 14I (CF) (SLB No. 14I) and supersedes any other potentially conflicting prior guidance.1 In addition to setting forth new approaches to making no-action determinations under Rules 14a-8(i)(7) and 14a-8(i)(5), SLB No. 14L also provides guidance on (i) email communications between companies and shareholder proponents, including how to prove timely delivery for purposes of Rule 14a-8, and (ii) proof of ownership required prior to submitting a shareholder proposal.
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