Co-authored by David S. Kravitz
On September 29, the Business Roundtable and the U.S. Chamber of Commerce filed a petition for review with the U.S. Court of Appeals for the D.C. Circuit challenging the validity of new Rule 14a-11, the so-called proxy access rule. On the same date, the Business Roundtable and U.S. Chamber of Commerce filed a petition with the Securities and Exchange Commission seeking to stay the implementation of Rule 14a-11 pending resolution of the matter by the Court of Appeals. This rule was adopted in August by the SEC along with an Amendment to Rule 14a-8, and was to become effective on November 15. See the August 27 edition of Corporate and Financial Weekly Digest for a summary of Rules 14a-11 and 14a-8 (i)(8).
On October 4, the SEC granted the requested stay in the implementation of Rule 14a-11. It also stayed the effectiveness of Amended Rule 14a-8, even though not part of the petitioner’s petition, on the basis that it was “intertwined” with Rule 14a-11, and cited a potential for confusion if the amendment to Rule 14a-8 were to become effective while Rule 14a-11 is stayed. While the parties have agreed to seek expedited review, the SEC’s stay of the two rules will remain in effect pending resolution of the matter by the Court of Appeals.
Most legal analysts, as well as a spokesman for the SEC, believe that the matter will not be resolved until some time in the spring of 2011, with the practical result that these rules will not be in effect for most public companies (including those with fiscal years ending December 31) until the 2012 proxy season.