With annual meeting season having concluded for calendar year-end companies, some companies are contemplating holding special meetings for various proposals that cannot wait until next year’s annual meeting. Set forth below are five key reminders regarding the proxy rules and process relating to special meetings. We have also prepared a client alert that provides further details on these issues.
A special meeting requires the filing of a preliminary proxy statement. The exemption in Rule 14a-6(a) from the requirement to file a preliminary proxy statement applies only to annual meetings and special meetings held in lieu of an annual meeting.
Notice and access may be used unless the special meeting relates to a business combination or cash-out merger. A company can use the notice and access rules for most special meeting proxy solicitations, provided it complies with the requirements of Rule 14a-16.
The 20 business day broker search requirement of Rule 14a-13 needs to be complied with. While Rule 14a-13(a)(3)(i) provides that if it is impracticable to conduct the broker search 20 business days prior to the record date of a special meeting, it may be conducted as many days before the record date of such meeting as is practicable, this exception should only be used in exceptional circumstances. In other words, companies need to comply with the 20 business day requirement of Rule 14a-13.
Review disclosure about the required vote, the applicable voting standard, and the method for counting votes very carefully, and obtain confirmation from the NYSE to determine whether matters being voted on are routine or non-routine. It is essential to provide correct disclosure about the vote required to approve a matter, the applicable voting standard, and the method for counting votes. With respect to broker discretionary voting, unless NYSE Rule 452 is absolutely clear, it is imperative to obtain confirmation from the NYSE – prior to filing the preliminary proxy statement – whether a matter is a routine matter, for which a broker “may vote” without receiving voting instructions from the beneficial holder, or a broker “may not vote” matter.
Companies can begin a proxy solicitation after a preliminary proxy statement has been filed, although proxy cards cannot be sent until the company has filed the definitive proxy materials and unless shareholders receive the definitive proxy statement with or before receiving a proxy card. Once a preliminary proxy statement has been filed, a company can begin soliciting activities, so long as a proxy card is not provided until dissemination of the definitive proxy statement pursuant to Rule 14a-3(a).