On May 11, the staff of the Division of Corporation Finance of the Securities and Exchange Commission (the Staff) issued 45 Compliance and Disclosure Interpretations (C&DIs) that relate to the proxy rules and proxy statements, replacing the Staff’s prior interpretations that were published in the Proxy Rules and Schedule 14A Manual of Publicly Available Telephone Interpretations (the Manual) and the March 1999 Supplement to the Manual (the Supplement). Thirty-five of the C&DIs reiterate prior guidance from the Manual and the Supplement. This article highlights the six C&DIs that reflect substantive changes and the four C&DIs that reflect technical changes to the prior guidance in the Manual and the Supplement. The Staff also noted that it is in the process of updating other previously published interpretations relating to the proxy rules.

C&DIs With Substantive Changes

C&DI 124.01

In C&DI 124.01, the Staff provides guidance that a soliciting party may cumulate votes among director nominees by simply indicating that in bold-faced type on the proxy card, as long as applicable state law grants a proxy holder the authority to exercise discretion to cumulate votes and does not require separate approval with respect to cumulative voting. The Staff eliminated the prior guidance from the Manual to the effect that discretionary authority to cumulate votes among directors in an election could be exercised, without indicating such authority in bold-face type on the proxy card, if appropriate disclosure of cumulative voting was included in the proxy statement.

C&DI 124.07

According to C&DI 124.07, if a company receives adequate advance notification of a proposal submitted by a shareholder for consideration at a meeting that is not intended to be included in the company’s proxy statement (a non-Rule 14a-8 proposal), the company must file proxy materials in preliminary form if the company cannot properly exercise discretionary authority on the matter in accordance with Rule 14a-4(c)(2).

C&DI 126.02

In C&DI 126.02, the Staff provides guidance that a company is not required to file a preliminary proxy statement in connection with a proposed change in its corporate name, consistent with Release No. 25217 of the Securities Exchange Act of 1934. Exclusions under Rule 14a-6(a) from the requirement to file a preliminary proxy that are intended to “relieve registrants and the Commission of unnecessary administrative burdens and preparation and processing costs associated with the filing and processing of proxy material that is currently subject to selective review procedures but ordinarily is not selected for review in preliminary form.”

C&DI 151.01

Note A to Schedule 14A requires that information called for by Items 11 (Authorization or issuance of securities otherwise than for exchange), 13 (Financial and other information) and 14 (Mergers, consolidations, acquisitions and similar matters) be provided in a proxy statement when security holders are asked to approve the authorization of additional securities to be used to acquire a specified company when there is no separate opportunity to vote on the acquisition itself. The Manual clarified that a company would be required to include such information in its proxy statement even when the securities will be sold in a public offering for cash to finance the transaction. In C&DI 151.01, the Staff provides that the information called for by Items 11, 13 and 14 need not be included in a proxy statement under this scenario if the company has alternative means for fully financing the acquisition because raising proceeds through the sale of common stock is not an integral part of the acquisition transaction. However, if the company plans to use cash proceeds from the public offering to pay any material portion of the consideration for the acquisition, then the instructions in Note A to Schedule 14A would apply.

C&DI 161.03

The Staff provided guidance in the Manual that, if a company is required to include the New Plan Benefits Table in its proxy statement, it must list all of the individuals and groups for which award or benefit information is required, even if the reported amount is “0.” C&DI 161.03 reiterates the guidance from the Manual but also provides that, instead of listing such individuals and groups for which the amount reported is “0” in the New Benefits Table, a company may instead provide narrative disclosure identifying any such individual or group to accompany the table.

C&DI 163.01

The Manual contained guidance that the financial and other information contemplated by Item 13 of Schedule 14A would need to be included in a proxy statement requesting shareholder approval of the elimination of preemptive rights because such a proposal involves the modification of a security for purposes of Item 12 of Schedule 14A. C&DI 163.01 reiterates the guidance from the Manual and clarifies that the financial and other information would need to be included in such a proxy statement to the extent required by Item 13 of Schedule 14A. Pursuant to Item 13 of Schedule 14A, certain information otherwise required may be omitted if it is not material in the context of the matter to be voted upon.

C&DIs With Technical Changes

C&DI 126.04

C&DI 126.04 clarifies that a registrant that files a Form S-4, including a preliminary proxy statement/prospectus, may not send proxy cards to security holders until the Form S-4 is declared effective and the final prospectus is furnished to security holders.

C&DI 126.05

C&DI 126.05 clarifies that a registrant that files a registration statement on Form S-4 that contains proxy statement disclosure and, after the effective date of that registration statement, sends additional communication to security holders relating to the transaction must file the communication as other soliciting material pursuant to Rule 14a-6(b) (and not under Rule 14a-12) of the Securities Exchange Act of 1934 no later than the date it is first sent or given to security holders.

C&DI 158.01

C&DI 158.01 clarifies that a company is required to disclose information in a proxy statement under Items 7 and 8 (director and executive officer compensation and related information) of Schedule 14A with respect to directors not standing for election for a special meeting to elect a new director.

C&DI 158.03

Similar to C&DI 158.01, C&DI 158.03 provides that an acquiring company is required to disclose information in its registration statement on Form S-4, including the target company’s proxy statement, under Items 7 and 8 (director and executive officer compensation and related information) of Schedule 14A with respect to directors of the acquiring company who will remain on its board, in addition to the target company directors who will be joining the acquiring company’s board, even when only the shareholders of the target company are required to approve the transaction.

The complete text of the new C&DIs is available here.