SEC Grants Stay of Proxy Access Rules

On October 4, 2010, the SEC exercised its discretion to stay the proxy access rules pending the resolution of a petition filed by Business Roundtable and the Chamber of Commerce of the United States of America challenging the proxy access and related rules. The rules had been scheduled to take effect on November 15, 2010. The proxy access rules would give shareholders who hold three percent of the outstanding stock of a company for at least three years the right to include director nominees in the company's proxy materials. This stay may effectively delay the implementation of the new proxy rules for the 2011 proxy season.

 

The petition filed in the U.S. Court of Appeals for the District of Columbia Circuit challenges the legality of the SEC's new proxy access rules. The SEC's decision to issue the stay does not address the merits of the petition but was intended to avoid unnecessary costs, regulatory uncertainty and disruption that could occur if the rules became effective during this challenge to their validity.

 

 

It is anticipated that this litigation will not be resolved until late next spring. As a result, the proxy access rules may not be effective for most companies until the 2012 proxy season. Companies should consider waiting to implement governance changes specifically related to proxy access until the matter has been resolved.