SEC Rule 14a-8: Ownership, Resubmission, and Representative Rules for Small Entities

The Securities and Exchange Commission (SEC) adopted amendments to Rule 14a-8 on September 23, 2020, changing the ownership thresholds, resubmission thresholds, and procedural requirements for shareholder proposals. These amendments affect companies that receive shareholder proposals and the shareholders who submit them.

Ownership Thresholds for Shareholder Proposals

Before the amendments, a shareholder needed to hold at least $2,000 or 1% of a company’s securities for at least one year to be eligible to submit a proposal under Rule 14a-8(b). The SEC replaced this with three alternative thresholds, as shown in the table below.

Pre-Amendment Requirement	Amended Ownership Requirements
≥$2,000 or 1% for at least 1 year	≥$2,000 for at least 3 years
	≥$15,000 for at least 2 years
	≥$25,000 for at least 1 year

The amendments also prohibit shareholders from aggregating their holdings to meet these thresholds. Each co-filer must individually satisfy one of the ownership requirements. This means that a group of shareholders cannot pool their shares to reach the minimum; each must independently hold the required amount for the required period.

Representative Documentation Requirements

New paragraph (b)(iv) requires that a shareholder who uses a representative to submit a proposal must provide written documentation that includes:

• The company to which the proposal is directed;
• The annual or special meeting for which the proposal is submitted;
• The shareholder submitting the proposal and the shareholder’s designated representative;
• The shareholder’s statement authorizing the designated representative to submit the proposal and otherwise act on the shareholder’s behalf;
• The specific topic of the proposal to be submitted; and
• The shareholder’s statement supporting the proposal.

Additionally, new paragraph (b)(iii) requires each shareholder to state that they are able to meet with the company, either in person or via teleconference, no less than 10 calendar days and no more than 30 calendar days after submission of the proposal, and to provide contact information and specific business days and times when they are available to discuss the proposal.

Resubmission Thresholds

The amendments also revised the levels of shareholder support a proposal must receive to be eligible for resubmission at the same company’s future shareholder meetings. The SEC modified the rule limiting the number of proposals a person or entity may submit for a particular company’s shareholder meeting.

Under Rule 14a-8, companies subject to the federal proxy rules must include shareholder proposals in their proxy statements, subject to certain procedural and substantive requirements. The rule permits a company to exclude a proposal if it fails to meet any of several specified procedural or substantive requirements, or if the shareholder does not satisfy certain eligibility or procedural requirements.

What the Source Does Not Say

The source does not specify the exact resubmission thresholds (e.g., the percentage of votes required for resubmission) nor the specific limits on the number of proposals a shareholder may submit. It also does not provide the effective date of the amendments or details on how companies should apply the new representative documentation requirements in practice. These details may be found in the final rule release.

Practical Checklist for Small Entities

• Verify that you meet one of the three ownership thresholds: $2,000 for 3 years, $15,000 for 2 years, or $25,000 for 1 year.
• If using a representative, prepare written documentation covering all six required elements.
• Be ready to meet with the company within 10 to 30 calendar days after submitting the proposal, and provide specific availability.
• Remember that co-filers cannot aggregate holdings; each must independently meet a threshold.
• Check the company’s proxy statement for any additional requirements.

These amendments are part of the SEC’s ongoing efforts to update its rules for shareholder proposals. Small entities should review their compliance procedures to ensure they align with the new requirements.

Sources

• sec.gov