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In the gift that keeps on giving, the Staff also issued two new CDIs on Friday that address the content of solicitations before furnishing a proxy statement under Rule 14a-12 and when a proposal “involves” another matter within the meaning of Note A to Schedule 14A when information about the other matter that is called for by Schedule 14A is material to a security holder’s voting decision on the proposal presented. The two new CDIs are as follows:

Question 132.03

Question: Rule 14a-12 permits solicitations before the furnishing of a proxy statement, provided that, among other things, written soliciting material includes the required participant information or a prominent legend advising shareholders where they can find that information. See Rule 14a-12(a)(1)(i). Can a soliciting party satisfy Rule 14a-12(a)(1)(i) through a legend that only includes a general reference to filings made by the soliciting party or the participants (e.g., a legend that refers shareholders to the prior year annual report on Form 10-K and proxy statement for participant information)?

Answer: No. Rule 14a-12(a)(1)(i) requires a soliciting party to disclose the “identity of the participants in the solicitation…and a description of their direct or indirect interests, by security holdings or otherwise, or a prominent legend in clear, plain language advising security holders where they can obtain that information.” The availability of participant information allows shareholders evaluating soliciting materials to understand the interests of those soliciting the shareholders at the time when the solicitations occur, including before the shareholders receive a proxy statement. When the Commission amended Rule 14a-12 to expand the ability to solicit before furnishing a proxy statement, the Commission cited the legend information as one of the safeguards to protect against misleading solicitations and maintain the integrity of the solicitation process. See Section II.C.1. in Release No. 34-42055 (Oct. 22, 1999). General references in the legend to filings made or to be made by the soliciting party or participants do not sufficiently advise shareholders where they can obtain the required participant information. Instead, the legend should:

– clearly identify the specific filing(s) where participant information appears (including by filing date);

– clearly describe the specific locations of the participant information in such filings, whether by reference to the relevant section headings, captions or otherwise; and

– include active hyperlinks to the referenced filings, when possible.

Soliciting parties also are reminded that participants’ direct and indirect interests in the solicitation are not limited to such participants’ security holdings. [November 17, 2023]

Question 151.02

Question: A registrant closes the acquisition of another company in a transaction in which security holder approval is not required. A portion of the consideration paid in the acquisition consists of convertible securities that, at the holder’s option, can be converted into shares of the registrant’s common stock or, at the registrant’s option, cash. Following the acquisition, the registrant files a proxy statement to solicit security holder approval for the authorization of additional shares of common stock that it could issue upon the conversion of the securities issued in connection with the acquisition. Would the solicitation of security holder approval for the authorization of the additional shares of common stock “involve” the acquisition for purposes of Note A of Schedule 14A?

Answer: A proposal “involves” another matter within the meaning of Note A when information about the other matter that is called for by Schedule 14A is material to a security holder’s voting decision on the proposal presented. The determination as to whether there is a substantial likelihood that a reasonable security holder would consider the information important in making a voting decision on a proposal ultimately depends on all the relevant facts and circumstances.

The authorization of additional shares of common stock is an integral part of the acquisition because it is necessary for the registrant to meet its obligation under the convertible securities issued as consideration for the acquisition. Therefore, the proposal to authorize additional shares of common stock “involves” the acquisition. In such circumstances, the registrant would have to include in the proxy statement information about the acquisition called for by Schedule 14A, unless such information has already been disclosed or sufficient time has passed so that the registrant’s historical filings fully reflect the acquisition. [November 17, 2023]

It is always helpful to get new and revised guidance from the Corp Fin Staff, but it is particularly helpful to receive the guidance when you are tasked with writing a securities law blog during the short week of Thanksgiving! As a result, I am particularly thankful for these new and revised CDIs!

– Dave Lynn