May 31, 2019

Proxy Rules: SEC Relief Permits Unaudited Company to Solicit Proxies

Yesterday, Corp Fin Director Bill Hinman issued an exemptive order permitting a company that was unable to provide the audited financial statements required under Rule 14a-3(b) to nevertheless solicit proxies for its upcoming annual meeting. Companies that don’t have audited financials are in a tough spot if they need to hold an annual meeting. Rule 14a-3(b) requires them to provide an annual report containing that information along with the proxy materials, and if they can’t do that, they can’t solicit proxies.

Many companies in this position opt to delay their annual meeting until they can comply with the proxy rules, but that’s not a viable strategy if you’ve received a court order compelling an annual meeting. That’s the situation in which Mimedx Group found itself & what prompted it to seek the exemptive order. Companies finding themselves in this kind of a bind should note both the potential availability of exemptive relief & the existence of the following conditions upon which the Mimedx Group order was premised:

– MiMedx is required to hold the Delayed 2018 Meeting as a result of an action taken by security holders pursuant to Florida law and the Florida Court ordering such meeting to be held on June 17, 2019;

– The company has made good-faith efforts to furnish the audited financial statements required by Rule 14a-3(b) before holding the Delayed 2018 Meeting but is unable to comply with this requirement;

– MiMedx has made a determination that it disclosed to security holders all available material information necessary for security holders to make an informed voting decision in accordance with Regulation 14A;

– Absent the grant of exemptive relief, MiMedx would be forced to violate either Florida law or the rules and regulations administered by the Commission; and

– The company faces a proxy contest with respect to the matters to be presented at the Delayed 2018 Meeting, with certain MiMedx security holders filing a definitive proxy statement soliciting proxies for, among other things, the election of their own director nominees.

These conditions weren’t pulled out of thin air. With the exception of the reference to the proxy contest, they mirror the requirements of Rule 30-1(f)(18), which sets forth the circumstances under which the Director of Corp Fin has been delegated authority to grant exemptive relief from the requirements of Rule 14a-3(b).

Chief Accountant Wes Bricker to Leave SEC

The SEC announced yesterday that Chief Accountant Wes Bricker is leaving the agency.  It also announced that Deputy Chief Accountant Sagar Teotia will serve as Acting Chief Accountant when Bricker leaves next month.

Enforcement: What’s in a Name?

I was kind of taken aback a few days ago when I saw the SEC’s litigation release announcing an enforcement proceeding against “Henry Ford.” Obviously, the SEC isn’t bringing an action against the long-dead father of the Model T, but as a Clevelander, the case made me think of the great Harvey Pekar & his famous “What’s in a Name?” story. I know the connection with securities law is pretty tenuous, but hey, it’s Friday.

John Jenkins