TheCorporateCounsel.net

Yesterday, the Texas legislature sent a bill to Governor Greg Abbott that, if signed into law, would permit Texas-based public companies to impose greater ownership thresholds on shareholders seeking to submit proposals – including proposals submitted under Rule 14a-8.

Specifically, if an eligible company amends its governing documents to incorporate this provision, a shareholder (or group of shareholders) would have to meet the following criteria to submit a proposal:

1) hold an amount of voting shares of the corporation, determined as of the date of submission of the proposal, equal to at least:

(A) $1 million in market value; or

(B) three percent of the corporation’s voting shares;

(2) hold the shares described by Subdivision (1):

(A) for a continuous period of least six months before the date of the meeting; and

(B) throughout the entire duration of the meeting; and

(3) solicit the holders of shares representing at least 67 percent of the voting power of shares entitled to vote on the proposal.

That’s a high bar! The bill would require companies to notify shareholders of the proposed adoption of these provisions in a proxy statement provided prior to the amendment’s adoption, and it would also require proxy statements to provide specific information about the process for submitting a proposal. The bill also says that these ownership thresholds wouldn’t apply to director nominations or procedural resolutions that are ancillary to the conduct of the meeting.

These amendments are part of the Lone Star State’s broader efforts to encourage companies to reincorporate and list shares on a home-state exchange (that is incorporated in Delaware). This article from Hunton’s Daryl Robertson gives a nice overview of the various corporations bills that the Texas Legislature is considering – including proposals to expand the jurisdiction of the business court that began operating in the state last September.

– Liz Dunshee