Separate Proposal Would Modernize Proxy Process
On September 16, 2026, the Securities and Exchange Commission (the “SEC”) proposed one of the most consequential changes to the federal proxy framework in decades: the rescission of Exchange Act Rule 14a-8, the shareholder proposal rule. Rule 14a-8 currently requires public companies to include a shareholder proposal in their proxy materials and on the ballot for a shareholder meeting if the proposal complies with procedural and substantive requirements outlined in the rule. If Rule 14a-8 is rescinded, eligibility to submit a shareholder proposal would be determined solely by applicable state law and company governing documents and companies would not be required, as a matter of SEC regulation, to include such proposals in their proxy materials. The proposal is the capstone of the SEC’s disengagement from the shareholder proposal process, following the Division of Corporation Finance’s November 2025
announcement that it would not substantively review requests to exclude most shareholder proposals and its subsequent August 2026 announcement that it would cease all review of exclusion notices under Rule 14a-8 and no longer issue “no objection” responses.
Shareholders currently may submit proposals outside the Rule 14a-8 process, and they could continue to do so if Rule 14a-8 is rescinded. In that regard, the SEC also proposed amendments to Exchange Act Rule 14a-4, which, among other things, governs a company’s ability to exercise discretionary authority to vote on proposals submitted outside of Rule 14a-8. The amendments provide that a company may exercise that discretionary authority to vote for or against a shareholder proposal if the company includes certain brief disclosures about the proposal in its proxy statement and form of proxy, and the shareholder providing the proxy does not check a new box on the proxy card indicating that the shareholder withholds its consent to the exercise of such discretionary authority.
The SEC also proposed a companion rulemaking that amends certain requirements relating to the proxy solicitation process.
After being on the books since 1942, the SEC has now determined that Rule 14a-8 exceeded the SEC’s statutory authority under Section 14(a) of the Exchange Act. In addition, the SEC cited independent policy reasons for rescinding Rule 14a-8, noting that the rule had become a mechanism for influencing interactions between companies and shareholders in a manner inconsistent with the rule’s purpose, that the rule placed the SEC in the position of making judgments about the application of state law and that the rule had inhibited the development of state law and private ordering. The elimination of Rule 14a-8 would thus undo a framework that has been used to govern the inclusion of shareholder proposals in proxy statements for over 80 years, and could have a profound effect on how shareholder proponents engage with companies going forward.
- The SEC has proposed to rescind Rule 14a-8 in its entirety, which would leave questions regarding shareholder proposals to state law and company governing documents.
- The proposal is grounded primarily in the SEC’s view that Rule 14a-8 exceeds the Commission’s statutory authority because it regulates substantive shareholder voting rights, a matter it believes is best left to state corporate law.
- The proposal applies to public companies, registered investment companies and business development companies.
- Proposed amendments to Rule 14a-4(c) would expand companies’ ability to exercise discretionary voting authority over certain shareholder proposals submitted outside the Rule 14a-8 process while at the same time providing shareholders granting a proxy the ability to withhold consent to the exercise of discretionary voting authority in a manner that is unavailable today.
|
The SEC proposes to completely rescind Rule 14a-8 on the grounds that the rule exceeds the scope of the Commission’s statutory authority and intrudes into matters traditionally governed by state corporate law. If adopted, shareholders would no longer have a right under the federal securities laws to have a proposal included in a company’s proxy statement if the proposal meets certain procedural and substantive requirements. The proposal would shift the governing framework for shareholder proposals from the federal securities laws to state corporate law and company-specific governance arrangements such as company charters and bylaws.
The SEC also proposed amendments to Rule 14a-4(c) which would expand a company’s ability to exercise discretionary voting authority with respect to shareholder proposals submitted outside the Rule 14a-8 process. Under the proposal, a company could vote uninstructed proxies with respect to a shareholder proposal if it provides a brief description of the proposal and its intended voting position in the proxy statement, includes a cross reference to this disclosure in the form of proxy and adds a checkbox to the form of proxy to permit shareholders to opt out of granting such authority.
The proposal could affect how companies and shareholder proponents approach proxy contests, independent solicitation campaigns and other shareholder engagement activities outside the traditional Rule 14a-8 framework.
The proposal would revise Rule 14a-6 to provide that a preliminary proxy statement and form of proxy are not required to be filed in circumstances where the company provides disclosure regarding a shareholder proposal in accordance with Rule 14a-4(c). However, under the proposed rule a preliminary proxy statement would be required to be filed in circumstances where a shareholder conducts a non-exempt “solicitation in opposition” with respect to the proposal or the election of directors. Shareholders conducting a proxy solicitation will be required to file a preliminary proxy statement, consistent with current requirements.
In a companion release, the SEC proposed several amendments to the proxy solicitation rules that are intended to modernize the solicitation process in light of technological developments and evolving shareholder communications practices. Specifically, the SEC proposed to:
- Eliminate the requirement that companies deliver an annual report to stockholders.
- Eliminate the requirement that a company send its proxy statement to stockholders no later than 20 business days prior to a meeting if documents are incorporated by reference into the proxy statement.
- Rescind Rule 14a-6(g), which requires large shareholders to submit Notices of Exempt Solicitation (PX14A6G), and eliminate the ability for shareholders to file notices (whether required or voluntary) under such rule.
- Reduce the minimum broker search period to five business days from the current 20 business day requirement.[1]
Although the proposals are subject to 60 days of public comment and possible changes in a final rule, public companies should consider:
- Continuing to prepare for the upcoming proxy season under the existing Rule 14a-8 framework, as the new rules are unlikely to be in effect prior to the start of the 2027 proxy season.
- Monitoring developments in Delaware and other relevant corporate law jurisdictions regarding potential changes to corporate law statutes to implement frameworks to govern the inclusion of shareholder proposals in company proxy statements.[2]
- Reviewing governing documents and advance notice bylaw provisions to assess possible changes that may be appropriate in a post-Rule 14a-8 environment.
- Evaluating whether to submit comments to the SEC regarding implementation issues, transition questions and potential state-law implications.
- Assessing how proposed Rule 14a-4 changes could affect future proxy contests and shareholder proposal campaigns.
The SEC’s proposals represent a wholesale reconsideration of the federal role with respect to shareholder proposals. Although the SEC’s proposals remain subject to public comment and could change before any final adoption, public companies and boards should closely monitor the rulemaking process and consider potential implications for future proxy seasons, shareholder engagement and corporate governance practices. We also think it is likely that the a final rulemaking that rescinds Rule 14a-8 will be subject to litigation challenges. We will continue to monitor developments and will provide updates as the rulemaking process progresses.
If you have any questions concerning the material discussed in this client alert, please contact the following members of our Securities and Capital Markets practice
[1] The SEC staff released guidance in January 2026 stating that the staff will not object if a company conducts its broker search less than 20 business days before the meeting record date, provided the company reasonably believes that its proxy materials will be timely disseminated to beneficial owners and otherwise comply with Rule 14a-13. See Corporation Finance Interpretations, Proxy Rules and Schedules 14A/14C, Question 133.02 (Jan. 23, 2026), available at www.sec.gov/rules-regulations/staff-guidance/corporation-finance-interpretations/proxy-rules-schedules-14a14c#133.02.
[2] See, e.g., Section 21.373 of the Texas Business Organizations Code, available at statutes.capitol.texas.gov/docviewer?docName=BO.21.htm%2321.373.
Back
