TheCorporateCounsel.net

With the effective date of voluntary E-Proxy just a week old, a few companies have already filed proxy materials indicating that they will be the first to “give it a go.” In our “E-Proxy” Practice Area, we have begun a list of those companies, complete with a link to their proxy materials.

Interestingly, one company’s proxy statement even has a statement from the company’s President in the “Letter to Stockholders” touting the use of E-Proxy:

“I am also pleased that we are one of the first companies to take advantage of the new Securities and Exchange Commission rules allowing issuers to furnish proxy materials over the Internet. Please read the proxy statement for more information on this alternative, which we believe will allow us to provide our stockholders with the information they need while lowering the costs of delivery and reducing the environmental impact of our annual meeting.”

This particular company also includes a FAQ about E-Proxy on its IR web page. I would expect many companies that utilize voluntary E-Proxy to include a note on their IR web page to explain what they are doing this year – and I understand that some companies have already posted explanations (even though I haven’t seen any others; if you do, let me know). Remember that the more complete – and clearer – an explanation about what the company is doing on your website, the fewer the number of calls to your IR department…

Note that the SEC’s new rules require the Notice & Access to inform shareholders that they have an option to request a paper copy, but there is no requirement for companies to make that statement on their IR web page.

How to Implement E-Proxy: Avoiding the Surprises and Making the Calculations

We have posted the transcript from our recent two-hour webcast: “How to Implement E-Proxy: Avoiding the Surprises and Making the Calculations.” It was a great webcast and the panelists fleshed out a lot of issues that I believe many companies have not yet considered. And the course materials are superb. Hats off to our fine panelists on this one!

More on the E-Proxy California Conflict

Here is a query from our “Q&A Forum”: “Following up on #2881 and Broc’s blog on Monday about California conflict with e-proxy, I note that Section 18(a)(2)(B) of the Securities Act (added by the NSMIA) provides that no law, regulation etc. of any state shall “directly or indirectly prohibit, limit, or impose any conditions upon the use of . . . any proxy statement, report to shareholders, or other disclosure document relating to a covered security or the issuer thereof that is required to be and is filed with the Commission or any national securities organization registered under section 15A of the Securities Exchange Act of 1934, except that this paragraph does not apply to laws, rules, regulations, or orders or other administrative actions of the State of incorporation of the issuer.” Doesn’t this solve the dilemma?”

And here is an answer from Keith Bishop: “I don’t think that this preemption would apply to the the California provision. Section 1501 does not refer to either a proxy statement or the annual report to shareholders required by the federal proxy rules. Section 1501 applies to both SEC reporting companies and non-reporting companies. It requires that a corporation send a report containing basic financial statements. While this requirement can be fulfilled by sending a Rule 14a-3 annual report to shareholders, the requirement itself in no way prohibits or imposes any conditions on the use of the 14a-3 annual report.

If, for example, the SEC were to amend Rule 14a-3 to eliminate the requirement that the annual report include financial statements, Section 1501 would not prohibit a corporation from sending that annual report. In other words, compliance with the SEC’s annual report requirement is independent of the requirement of Section 1501.

I think that the only possible argument is that by imposing an independent requirement, Section 1501 indirectly “limits” the use of a report to shareholders. However, I think that interpretation is a stretch. Also, Rule 14a-3 annual reports are technically not required to be filed with the SEC and I’m not certain that the NYSE and Nasdaq requirements are encompassed by the reference to any national securities organization registered under Section 15A of the SEA.”

– Broc Romanek