As we previously posted, on November 17, 2025, the SEC’s Division of Corporation Finance announced a significant change in how it will engage with shareholder proposal exclusions. Just two days later, on November 19, 2025, the Staff issued what appears to be the first public response letter under its revised “reasonable basis” framework. In response to Air Products and Chemicals’ notice of intent to exclude a shareholder proposal submitted by John Chevedden, the SEC stated simply: “You represent that the Company has a reasonable basis to exclude the Proposal. Based solely on that representation, we will not object if the Company excludes the Proposal from its proxy materials.”
This brief response reflects the Division’s new approach for the 2025-2026 proxy season. Under the revised guidance, the SEC will not provide substantive views on company no-action requests seeking to exclude shareholder proposals, other than exclusions under Rule 14a-8(i)(1). Companies must still submit their Rule 14a-8(j) notice at least 80 days before filing their definitive proxy materials. However, if a company wishes to receive a non-objection response like the one issued to Air Products, it must include an unqualified representation that it has a reasonable basis for the exclusion under Rule 14a-8, prior published guidance, or judicial precedent.
Air Products included such a representation, stating:
“In accordance with the Staff Statement, the Company is furnishing this letter as a supplemental notice regarding the No-Action Request. As outlined in the Staff Statement, the Company would like to receive a response with respect to its notice that it will exclude the Proposal from the Proxy Materials. In this regard, the Company represents without qualification that it has a reasonable basis to exclude the Proposal based on the provisions of Rule 14a-8, prior published Staff guidance and/or judicial decisions. As further described in the No-Action Request, the Proposal was received after the Rule 14a-8(e) deadline and the Staff has made clear in Staff Legal Bulletin No. 14 (Jul. 13, 2001) and in a long string of no-action responses that it strictly construes the deadline for submitting shareholder proposals under Rule 14a-8(e). Accordingly, the Company believes it has a reasonable basis to exclude the Proposal from the Proxy Materials.”
Importantly, the SEC’s updated guidance does not require companies to provide a detailed legal analysis supporting the exclusion. Companies must provide an explanation of why the company believes that it may exclude the proposal, which should, if possible, refer to the most recent applicable authority, such as prior Division letters issued under the rule, as required under Rule 14a-8(j). This may result in shorter Rule 14a-8(j) notices and introduces a period of uncertainty heading into the upcoming proxy season.
Companies are already receiving proposals, and absent the SEC’s prior substantive review, they now face more difficult decisions. Exclusions involving obvious procedural defects, such as the missed deadline in Air Products, are likely to remain relatively straightforward. But proposals involving more substantive considerations will require companies to weigh the risks of excluding a proposal—such as potential litigation or public campaigns by proponents—against the alternative of including the proposal and waiting another season to see how the new framework evolves.
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