To the extent your board is considering matters that will later require a stockholder vote, ensure that the minutes are sufficiently detailed to support the later drafting of a proxy statement. In the not-so-distant past, material discrepancies between the two was the “open sesame” for stockholders to demand the inspection of informal board materials in Section 220 litigation.
While the heightened standards of the revised Section 220 blocked that result here, best practices would still be to be mindful that the minutes adequately cover material matters that will likely need to be disclosed to the stockholders in a proxy statement.
Think of your entire package of board materials, the agenda, any board books, and the minutes of the meeting as materials that might someday be evidence in litigation where the board may need to convince a fact finder that it acted loyally and with due care on certain matters before it.
The Court of Chancery notes things like how long it appears (from the minutes) that certain matters were discussed and in what level of detail. Make sure your minutes reflect the relative importance of the matters under discussion. For instance, the minutes should not have a very robust discussion of something somewhat mundane (like whether to serve one brand of soda or another in the cafeteria) but a relatively miserly discussion of the merger transaction being considered.
If you’re looking for more guidance on preparing minutes, check out the resources in our “Board Minutes” Practice Area, including a variety of checklists on minutes-related topics.
Over on DealLawyers.com, I recently blogged about the Delaware Chancery Court’s decision inATG Capital Opportunities Fund LP v. Lane, (Del. Ch.; 8/26), which involved an activist’s successful challenge to an effort its slate of nominees under the terms of the company’s advance notice bylaw. This Sidley memo focuses on an interesting aspect of the case – in addition to the board minutes, the company apparently had an AI transcription of its board meeting, and both were introduced into evidence. As this excerpt from the memo explains, they didn’t match, and that didn’t help the board’s argument:
The court had two written records of what happened in the boardroom: the official minutes and AI-generated transcripts of the same meetings. The minutes described the board’s decisions in the way minutes typically do, recording the action taken and the stated reasons for it. The AI transcripts purported to capture the discussion itself. At one meeting, for example, the minutes recorded that a defensive measure was adopted to protect stockholders; the AI-generated transcript recorded the chairman describing it as “necessary in order for the board to remain in its position.”
Notwithstanding common warnings about inaccuracies in AI-generated material, nothing in the opinion suggests that the admissibility or reliability of the transcripts was contested; they were joint trial exhibits, cited alongside testimony without qualification. After reviewing the record, the court ruled for the investor on its challenge to the board’s rejection of the nomination notice.
In the court’s view, the board’s concerns were matters for stockholders to weigh in the election rather than grounds to exclude the nominees from the ballot. Although the AI transcripts did not decide the case, they informed the court’s account of the board’s deliberations, and the court cited them in the portion of the opinion assessing the board’s motivations.
The memo identifies several practical takeaways for companies from the decision, including the need to decide deliberately when and how AI transcription can be used, and to treat board and other sensitive meetings with particular caution. In addition, the memo says that companies should articulate a risk-based policy for AI transcription, decide whether AI transcripts should be kept as corporate records, and train directors and officers to speak knowing a transcript may exist, and to draft minutes with that in mind as well.
Last month, I blogged about Corp Fin’s new CFIs addressing 13G eligibility. This Weil memo summarizes the key takeaways from those CFIs for public companies and 13G institutions:
– Company-initiated engagement is on firmer footing. Because issuer initiation is now an explicit mitigating factor, public companies seeking substantive dialogue with large passive stockholders should consider extending the invitation themselves and documenting that they did so.
– Do not expect a return to 2024. Institutional investors’ engagement protocols were rebuilt around the 2025 guidance. Companies should anticipate that many institutional holders will remain measured in engagement heading into the 2027 proxy season.
– Limited comfort in proxy contests. CFI 103.14 confirms that 13G filers can hear out and share views with both sides of a proxy contest. Companies in contested or potentially contested situations should assume their passive holders are talking to the other side, and calibrate their own solicitation and engagement strategy accordingly.
– Structure the conversation. Agendas and framing still matter. Well-prepared companies will make it easier for their shareholders to stay in the 13G lane.
– Safer ground for 13G investors, within limits. For institutional investors, issuer-initiated meetings, explaining the rationale for a past or upcoming vote, and seeking clarification of a company’s disclosures are now expressly safer ground. Pressuring management, including conditioning voting support on the adoption of specific measures, remains disqualifying, and 13G eligibility continues to turn on all of the facts and circumstances. Investors should consider documenting who initiated each engagement.
If you’re interested in other perspectives on the new CFIs, check out the other memos we’ve posted in our “Schedule 13G” Practice Area.
At an open meeting yesterday, the SEC announced that it was considering potential designations of additional credentials that would qualify an individual as an accredited investor. That may seem like an unusual way to expand accredited investor status, but remember that Rule 501(a)(10) of Reg D allows the Commission to designate “one or more professional certifications or designations or credentials from an accredited educational institution” as qualifying an individual for accredited investor status.
Here are the credentials that the SEC proposes to designate as conveying accredited investor status along with links to the individual notices the agency issued with respect to each potential designation:
(1) Passing an accredited investor examination to be developed by FINRA;
(2) Holding a license as a U.S. certified public accountant;
(3) Holding a charter as a Chartered Financial Analyst;
(4) Holding a certification as a Certified Financial Planner in the United States;
(5) Holding a license as a FINRA Investment Banking Representative license (Series 79) or a FINRA Research Analyst license (Series 86 and Series 87).
Rule 501(a)(10) requires the SEC to designate qualifying credentials only after notice and an opportunity for public comment, and to post the credentials recognized as satisfying the criteria for accredited investor status on its website. The comment period for the proposed designation of these credentials will end 60 days after publication of the relevant notices in the federal register.
Commissioner Hester Peirce’s last day on the job is Friday, October 2nd, and her departure will leave the SEC with just two sitting commissioners. As Meredith blogged earlier this year, the way the SEC’s quorum rules work, having only two commissioners won’t affect its ability to act, but yesterday the SEC nevertheless opted to amend its quorum rule to account for the possibility that one commissioner might recuse himself from a particular matter. Here’s an excerpt from the SEC’s release adopting the amendment:
In prior years, the Commission has occasionally been in the position of having fewer than three members and believes it prudent to adapt its quorum rule to further accommodate that contingency. Moreover, the Commission has found that situations often arise in which one or more Commissioners have disqualified themselves or are otherwise disqualified from participating in a matter.
When such situations arise, it is important that the Commission be able to continue to conduct business. Accordingly, the Commission is amending the quorum rule to specify that, in a situation in which only one Commissioner is able to participate in a matter because all other Commissioners currently in office are disqualified from participating in that matter, the remaining member would constitute a quorum for that particular matter.
By now, you may well be asking how the Commission could adopt this rule without notice and opportunity for comment. The adopting release addresses that issue too:
The Commission finds, in accordance with the Administrative Procedure Act (the “APA”), that these amendments relate solely to agency management and organization and do not constitute a substantive rule. Accordingly, the APA’s provisions regarding notice of proposed rulemaking and opportunity for public comment are not applicable.
I doubt very much that appointing new SEC commissioners is high on the Trump administration’s agenda right now, but for the record, this is no way to run a railroad.
Check out our latest “Timely Takes” podcast featuring Cleary’s J.T. Ho & his monthly update on securities & governance developments. In this installment, J.T. reviews:
– SEC’s Rule 14a-8 Recission & Proxy Solicitation Modernization Proposals
– New CFIs on 13G/D & Form S-1
– SEC Proposal to Modernize Transfer Agent Regulation
– Insights from ISS’s 2026 Policy Survey
– NYSE’s Proposed five-year On-Ramp for Internal Audit Function
As a bonus, J.T. also discussed the SEC’s recent roundtable on 24-hour trading.
As always, if you have insights on a securities law, capital markets or corporate governance issue, trend or development that you’d like to share in a podcast, we’d love to hear from you. You can email me and/or Meredith at john@thecorporatecounsel.net or mervine@ccrcorp.com.
Over on The Cooley Governance Blog, Broc recently posted about some of the key takeaways from the SEC’s roundtable on 24-hour trading. Among other things, panelists indicated that retail investors are likely to lead the way when it comes to overnight trading, while institutional investors are likely to be more cautious. According to this excerpt, however, issuers are the most cautious market participants when it comes to 24-hour trading:
The issuer perspective was notably more cautious. Thin overnight liquidity could permit relatively small trades to create large price movements that may not reflect fundamental value or broad investor sentiment, with potential consequences for long-term shareholders and index-related considerations.
Extended trading also may affect when companies release earnings and other material information, since issuers traditionally have considered the availability of deep liquidity when timing disclosures. The issuer representative advocated greater public-company participation in developing volatility protections and other market-wide guardrails. The notes also flag for consideration whether issuers should develop escalation or overnight-monitoring procedures around significant anticipated events.
The blog reports that the issuer discussion placed 24-hour trading within the broader debate over the health of U.S. public markets. While participants noted that increased international participation could make U.S. markets more attractive, the cost and complexity associated with public company status and raising capital in the public markets raised more fundamental concerns.
Accordingly, the key from an issuer perspective isn’t whether longer trading hours generate greater trading volumes, but whether they improve issuers’ ability to raise capital, provide liquidity to investors, and support stable valuations.
Over on The Harvard Governance Blog, a recent post from Paul Weiss speculates on how shareholder engagement might evolve if the SEC’s proposal to rescind Rule 14a-8 is adopted. Here are some of the blog’s predictions:
Shareholders may increasingly turn to a company’s governing documents to submit shareholder proposals. Many companies’ bylaws already permit shareholders to submit business for consideration at an annual meeting independent of Rule 14a-8, subject to advance notice and other procedural and disclosure requirements. These provisions have rarely been invoked because Rule 14a-8 offered a simpler and less costly path to include a shareholder proposal in the proxy materials.
With the rescission of Rule 14a-8, more shareholders may look to propose business under a company’s bylaws. Accordingly, companies may consider reviewing their advance notice provisions to ensure that appropriate procedural and disclosure requirements are in place to address a potential increase in shareholder proposals.
Shareholders may seek more direct engagement with the board. Shareholder proponents may seek to elevate their concerns to directors through direct communications to the board. Some proponents may also pursue books-and-records requests to scrutinize the scope and quality of board oversight. Consequently, companies may need to assess which communications and issues warrant board attention and ensure that board records appropriately reflect oversight of matters material to the company.
Shareholder proponents could, on occasion, seek to leverage hedge fund activist campaigns to advance their objectives. In the absence of Rule 14a-8, some proponents may attempt to capitalize on the heightened attention surrounding activist campaigns to draw focus to governance and other concerns that have historically been advanced through shareholder proposals. Although such strategies are likely to remain the exception rather than the rule, they may provide an alternative avenue for proponents seeking visibility and engagement.
Interestingly, the authors are skeptical that rescission of Rule 14a-8 will lead to widespread litigation over shareholder proposals, primarily due to the cost and compressed timelines involved. In addition, while they anticipate a rise in “vote no” campaigns, the authors are also skeptical that these will frequently move the needle.
It looks like somebody leaked Anthropic’s draft S-1 filing to Reuters. I haven’t seen any formal reaction from the company, but Claude seems unfazed. The S-1 apparently has an 80-page(!) Risk Factors section, but Reuters has zeroed in on some truly apocalyptic risk disclosure in its article on the filing:
Anthropic plans to caution potential investors in its IPO that advanced AI could pose “catastrophic or existential risks to humanity,” an extraordinary warning by a company seeking to profit from the same technology.
The company’s IPO prospectus, reviewed by Reuters, highlights risks associated with its AI models, which it said could exhibit “self-preserving behaviors,” including attempts to “resist shutdown,” to “conceal or manipulate information” and behavior “resembling blackmail.”
“Our development of highly advanced models, platforms, and applications and expansion of use cases could further increase the risk that our models cause harm,” Anthropic said in the filing.
Reuters goes on to say that while companies routinely outline risks, “few, if any, have issued warnings suggesting their technology could cause potential human extinction.” Yeah, well, I can’t argue with that assertion.
Anthropic deserves credit for confronting some of the downright terrifying risks of AI head-on in its filing. Nevertheless, I think this prospectus disclosure could be enhanced by the use of graphics, and I have a very specific graphic in mind, courtesy of Ren & Stimpy:
We live in very crazy times, and sometimes the only alternative to giving in to existential dread is to shake your head and laugh.
Yesterday, Corp Fin’s Office of Mergers & Acquisitions issued a no-action letter to Goldman Sachs Group addressing a retail voting program modeled after the one Exxon established last year. Goldman outlined the terms of its “voting instruction plan” (VIP) in its no-action request. The terms of the VIP program are similar to Exxon’s plan, but this Goodwin blog highlights some matters that weren’t addressed in Exxon’s no-action letter:
– Enrollment in retail voting program permitted before a meeting-specific definitive proxy statement is furnished. The Division’s no-action relief extends beyond Rules 14a-4(d)(2) and (d)(3) to Rules 14a-3(a), 14a-4(f) and 14a-12(a)(2), which generally require investors to receive a definitive proxy statement before or together with a proxy card and regulate solicitations made before a definitive proxy statement is furnished. The practical effect is that program enrollment communications may be sent, and investors may enroll, before the definitive proxy statement for a particular meeting is furnished and outside a particular annual or special meeting proxy solicitation. Investors must still receive the definitive proxy statement before or at the same time as the related proxy card or voting instruction form.
– Participant information may be omitted from enrollment communications. The separate relief under Rule 14a-12(a)(1) concerns the requirement that pre-proxy solicitation communications identify the participants in a solicitation and describe their interests. Under the relief, that information will instead be included in each definitive proxy statement. Program enrollment communications would remain subject to the applicable Rule 14a-12 legend and filing requirements. As a practical matter, enrollment communications may focus on how the program operates and the choices available to investors without including the participant information in each communication.
– Tailored employee and alumni outreach, including internal-system enrollment for current employees. The request contemplates communications tailored to current employees and partners, former partners and other former employees, as well as enrollment by current employees through an internal company system. This would permit the issuer to use regular employee and alumni communications and an internal enrollment channel, rather than relying only on enrollment materials distributed through the vote processing agent. The Division specifically noted Goldman Sachs’ representations that communications to current employees would not state or imply that enrollment was a condition of employment or partnership, that enrollment would have no bearing on compensation or advancement potential, and that the company would implement reasonable measures designed to prevent abuse or misuse of current-employee enrollment status.
– Potential administrative and technological improvements. The request contemplates updates to the company’s program’s enrollment and processing mechanics as the program matures. These updates may include allowing a single enrollment form to cover multiple registered or beneficial accounts, enabling additional broker-dealers to participate through one vote-processing agent, and offering enrollment through a centralized or persistent portal. These features could simplify enrollment and expand access through additional intermediaries while maintaining the investor protections described in the request.
Here’s Goldman’s press release announcing the VIP program.
Update: Looks like a big week for retail voting programs. Here’s a no-action letter that Tesla received for its program today.
