With a potential government shutdown less than 24 hours away, Corp Fin hasn’t provided any updates to the most recent version of the government shutdown guidance that it posted in March 2025. That’s probably still the best place to look for information on what a shutdown will mean for public companies, but you may also want to check out this Ropes & Gray memo on the implications of a shutdowns for SEC filers. This excerpt offers some advice on actions companies should take before and during a shutdown:
Before a shutdown (non-WKSIs without effective registration statements only)
– Consider putting a shelf registration statement in place and submitting an acceleration request as soon as your filing is substantially complete and statutory requirements are met.
– Line up any necessary EDGAR access codes and passwords given constrained staffing during a shutdown.
During a shutdown
– Continue timely Exchange Act filings via EDGAR.
– Companies with effective shelf registration statements may proceed with offerings via prospectus supplements (and, for WKSIs, via post-effective amendments, if needed).
– Non-WKSIs that must update an effective registration statement should consider whether they can proceed without a post-effective amendment that will need to be declared effective.
– For offerings relying on Rule 430A that missed the 15-day pricing window, consider Rule 462(c) post-effective amendments to restart the 15-day period.
– If the shutdown is protracted, non-WKSIs may want to evaluate whether to use the 20-day automatic effectiveness path, if available, after carefully weighing risks (eligibility, review status, unresolved comments), including the antifraud and liability provisions of the federal securities laws, which apply equally to registration statements that go effective by operation of law.
On another shutdown related topic, although the Trump administration is threatening mass firings of government employees in the event of a shutdown, Reuters is reporting that the head of the SEC’s union has told members that there’s no reason to believe that this shutdown will be different than prior ones, or that it will result in additional staff reductions.
Update: Thanks to reader Jeffrey Rubin for giving us a heads up that the SEC adopted this updated version of its Government Shutdown Operations Plan in August 2025.
A couple of recent posts on the Business Law Prof Blog combine to make the point that in the race to dethrone Delaware, Nevada just seems to be a lot more serious and thoughtful than Texas. Here’s an excerpt from Prof. Ben Edwards’ post discussing a new Nevada Comission created to study the state’s business courts:
Yesterday, the Nevada Supreme Court officially created a Commission to Study the Adjudication of Business Law Cases. I previously covered the Supreme Court’s proposal here and submitted a letter in support of the proposal. The order creating the Commission contemplates a continuing public process. It provides that the Commission “shall conduct all hearings in public and post all meeting minutes and documents considered by the Commission on the Supreme Court’s website.”
In a related LinkedIn post, Prof. Edwards points out that five of the attorneys on the 24-member Commission have collectively appeared in 242 Nevada Business Court Cases in the past decade.
Meanwhile, Prof. Ann Lipton provided her take on recent developments in The Lone Star State. She’s not impressed:
I keep explaining in various spaces so I may as well articulate it here too: It’s tough to make predictions, especially about the future, but I would be surprised if Texas wins the current chartering race, or at least, wins the race it’s currently running. The issue for Texas is that it keeps demonstrating that it is not interested in crafting a well-designed – even manager-friendly – corporate law; instead, it is interested in using corporate governance as another cudgel in the culture war.
Let’s look, for example, at two recent amendments to its corporate code: allowing corporations to limit shareholder proposals by those who hold either less than $1 million worth of stock or 3% of voting shares; and the proxy advisor law that puts a variety of restrictions on proxy advisor advice.
These laws explicitly take aim at liberal-coded measures; shareholder proposals, for example, have historically been oriented toward liberal causes (despite a recent upsurge in anti-ESG proposals), and the proxy advisor law is targeted at “ESG” advice.
The laws are also a model of poor drafting. The shareholder proposal law, for example, does not apply to corporations chartered in Texas, but does apply to corporations headquartered in Texas or listed on the (currently nonexistent) Texas Stock Exchange. The proxy advisor law, by contrast, applies to corporations chartered in Texas or headquartered in Texas, but not companies listed on the TSE. I don’t know why the inconsistency, and I’m guessing neither does the Texas legislature.
She also points out that while the Texas legislature scrambled to enact anti-woke corporate legislation, it still hasn’t given its corporations the ability to enter into the kind of shareholder agreements that Delaware amended its statute to permit following the Chancery Court’s Moelis decision. Despite corporations’ obvious desire for the flexibility to enter agreements of that kind, the legislature hasn’t tweaked its statute, and those agreements remain “somewhere between very difficult and impossible to adopt in Texas.”
Texas’ AG Ken Paxton’s announcement that he’s investigating ISS & Glass Lewis for “issuing voting recommendations that advance radical political agendas rather than sound financial principles” seems to be additional confirmation that the state’s banking on the culture war to turn it into a mecca for Delaware’s corporate diaspora.
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 Spring 2025 Reg Flex Agenda/New Corp Fin Director
– Nasdaq Listing Standard Proposals
– SEC Comments on Segment Reporting
– Spencer Stuart Survey of Nominating & Governance Committee Chairs
– BlackRock’s Global Voting Report
Bonus topics this month include the first tariff-related securities lawsuit, retail investor activism and a House Financial Services Committee hearing on shareholder proposals.
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 LinkedIn, ExxonMobil’s announcement of its retail voting program has prompted a sharp response from Prof. Sarah Haan, who describes it as providing for “perpetual blind proxies.” Here’s an excerpt from her critique:
The proxies are “blind” because shareholders sign up without knowing anything about how management will cast their votes. In fact, the votes are “cast” before the proxy statement is distributed to shareholders—meaning that shareholders have not yet been able to learn who’s running for election, what matters will be voted on, or the company’s position on any of these things. (As a point of fact, a shareholder could invalidate the blind proxy for that one election by executing a follow-on, fully-instructed proxy, but telling shareholders that their vote has already been “cast” is confusing and will discourage this.)
Obviously, the point of perpetual blind proxies is to shift voting power from retail voters to corporate managers, by making it exceedingly difficult for shareholders to navigate the complexities of voting their personal preferences. Perpetual blind proxies are presented as a pro-democracy innovation, but actually they demonstrate the vulnerability of proxy voting as a legal device. Incumbent boards have strong motives to use proxy voting to discourage shareholders from exercising independent choice. This is exactly what perpetual blind proxies do.
Prof. Haan’s post has received many likes and favorable comments from shareholder democracy advocates. I think a big part of what these folks are concerned about is that Exxon’s program is likely to be very popular with retail investors, who are inclined to side with management if they vote at all. This program is designed to make it easier for them to vote, and so I’m 100% certain that Exxon management believes that it will enhance the level of support it receives for its agenda.
I’m also sure that many retail investors won’t think that’s a bad thing. Take me, for example. I dutifully fill out my proxies and return them every year- and I’ll let you in on a little secret, I follow management’s recommendations almost all of the time. Since that’s the case, I’d like to have an option to do that on a “set it and forget it” basis.
Do I understand what that means in terms of shifting power to management? You bet I do, and I think it’s condescending to assume that other retail investors won’t and paternalistic to suggest that they shouldn’t have the option to sign up for something like this. I’m not going to opt in to a program like Exxon’s if I have concerns about management, but in that case, I’m probably just going to sell my investment anyway. Shareholder democracy proponents will say that’s a cynical and apathetic choice. Perhaps it is, but I also think it’s not an irrational one for a retail investor.
So, where others see Exxon as creating a mechanism for “perpetual blind proxies,” I see it as facilitating “rational apathy” on the part of retail investors like me – and there are a lot of retail investors like me. Shareholder democracy advocates know that too, and I think that it shows in their response to Exxon’s program.
On Friday, SEC Chairman Paul Atkins reversed the agency’s existing policy of refusing to consider proposed settlements of enforcement proceedings and “bad actor” waiver requests simultaneously. The existing policy was adopted (see second blog) during the early stages of the Biden administration and reversed a policy adopted by former SEC Chairman Jay Clayton. Here’s an excerpt from Chairman Atkins’ statement:
In consultation with the Divisions of Enforcement, Corporation Finance, and Investment Management, I believe that it is appropriate to restore the Commission’s prior practice of permitting a settling entity to request that the Commission simultaneously consider an offer of settlement that addresses both an underlying Commission enforcement action and any related waiver request. This salutary practice promotes fairness and economy of Commission resources but unfortunately was changed by the prior Administration.
An offer of settlement in a Commission enforcement action that includes a contemporaneous waiver request will be presented to the Commission by the staff for simultaneous consideration. This approach will enable the Commission to consider both the proposed settlement and waiver request together, within the context of the relevant facts, conduct, and consequences, and with the benefit of the analysis and advice of the relevant Commission Divisions, to assess whether the proposed resolution of the matter in its entirety achieves the Commission’s three-part mission more generally. This approach will enhance efficiency and certainty in the settlement process and avoid a siloed internal consideration of the matter, which are critical factors in reaching comprehensive settlements that are in the best interests of investors.
This change in policy is good news for targets in enforcement proceedings. Under the policy adopted during Biden administration, targets settling with the SEC faced uncertainty because their settlement proposal and request for a waiver were not considered simultaneously. That left them in a position where they might find themselves bound by a settlement that they would not have entered into absent the belief that a waiver would be granted.
Earlier this month, Labrador announced the winners of its 2025 U.S. Transparency Awards. This excerpt from its press release discusses the winner of the award for best overall transparency:
Best Overall Transparency: Lowe’s Companies
This year, Lowe’s stands out as the champion of transparency. Lowe’s prioritized readers by implementing best practices across all documents. This includes using graphics and visuals to effectively illustrate company goals and performance. Notably, Lowe’s produced engaging executive summaries, especially in the proxy statement. The company is also proactively anticipating the requirements of CSRD by disclosing its value chain and aligning the sustainability report with the European Union’s European Sustainability Reporting Standards (ESRS).
Be sure to check out the Transparency Awards website for more details about the awards and the companies that received them. Here’s Broc’s 8-minute video with information about the selection process and this year’s winners.
When the SEC’s Reg Flex Agenda was published a few weeks ago, John pointed out the somewhat cryptic item of “Rationalization of Disclosure Practices.” Yesterday afternoon, in remarks at the “Financial Markets Quality Conference” at Georgetown, SEC Chair Paul Atkins gave a clearer glimpse into which disclosures could be on the chopping block. This Bloomberg Law article recaps:
Companies sometimes spend several pages discussing risk factors in their annual 10-K reports to meet Securities and Exchange Commission requirements, confusing investors about what’s important, Atkins told reporters at a Georgetown University conference. Firms have risk-averse lawyers who “dump the kitchen sink in,” the Republican said.
“It’s become a repository for too much,” Atkins said. “It’s not serving investors well.”
• The SEC during the first Trump administration required companies to have a risk factor summary of no more than two pages in their 10-Ks, if their reports discussed risks for more than 15 pages.
• Atkins said Thursday the agency also is looking to change rules for companies’ executive compensation reporting to ensure they provide “material” information to investors.
• The SEC’s work to update disclosure rules will happen during the “coming months and years,” the chairman said, without offering more specifics.
Like I said yesterday, the disclosure regime is only piece of the puzzle for public companies – but there is room for improvement!
Keep in mind that a government shutdown could slow down these ambitious rulemaking initiatives. That’s looking like a strong possibility right now – 77% of Polymarket bettors have their money on it as of the time of writing! – but there’s still some time to reach a deal. If there’s no continuing resolution or actual agreement soon, I’m sure John will share reminders next week from our previous editions of “The Government Shutdown Blues” – and color on how things could be different this time around.
Last week, Dave blogged about Corp Fin’s new CDI on filer status. This interpretation has been flying under the radar – but it’s actually a pretty big deal for companies that lose their eligibility as smaller reporting companies under the SRC revenue test – (paragraph (2) or 3(iii)(B) of the SRC definition in Exchange Act Rule 12b-2) – and need to transition to being accelerated filers.
Moving into the accelerated filer category means that a Section 404(b) auditor attestation is required – which adds time & expense to the filing process. According to the CDI – which is No. 130.05 in the “Exchange Act Rules” category – companies have a year after the loss of SRC status to continue as non-accelerated filers (without the expensive auditor attestation). This clarifies Rule 12b-2 in a way that’s different from how some people had been interpreting it – which will be welcome news to SRCs, but keep in mind that the accommodation applies only if the SRC loses eligibility due to the revenue test, not the public float test.
If that’s all clear as mud, take a look at this Filer Status Guide from Cooley. It has flowcharts that show when to evaluate filer status and the questions to ask.
Here’s something Meredith blogged yesterday on The Proxy Season Blog:
On Cooley’s Governance Beat Blog, Broc shared that Exxon has now filed the solicitation materials related to its retail voting program, whereby its shareholders could “opt in” to vote their shares in line with the Board’s recommendation. These are the materials Exxon noted that it planned to file with the Commission pursuant to Rule 14a-12 in its no-action request. It also committed to subsequently filing any material changes to the materials in the same manner. The materials consist of:
– Two email invitations to the program (one for registered holders, one for beneficial)
– Two printed letters to be mailed to shareholders (one for registered holders, one for beneficial) wth QR codes
– Website instructions showing the options to give standing instructions on all matters or give standing instructions on all matters except a contested election or M&A transaction (which options were detailed in its no-action request) — plus terms of the “voting consent agreement” and FAQs
– The confirmation page
Check them out!
As a post-script, I’ll add that in a webinar yesterday hosted by the Society for Corporate Governance, the panelists emphasized that this voting program can be turnkey if adopted by other companies – i.e., other companies can crib from Exxon’s process and filings. Though keep in mind that if anyone wants to change program features – which will probably happen sooner or later – they’d need to seek separate no-action relief for the new fact pattern.
Daved blogged last week about an SEC media statement that the agency is prioritizing a proposal to eliminate quarterly reporting requirements. That same day, Bloomberg and others also reported on similar comments from SEC Chair Paul Atkins.
Does the potential demise of 10-Qs mean all quarterly communications – and disclosure lawyer jobs – will go away? It’s way too early to tell, but my crystal ball says: “probably not.” For example, here’s an excerpt from the Bloomberg article about Chair Atkins’ interview:
He noted that many investors get more information from earnings calls rather than the quarterly reports.
So, there would be disclosure issues involved with the earnings call – maybe even more, in the absence of a 10-Q. This Business Insider article speculates on how the change to reporting requirements could affect us “pencil pushers.” The article repeats the point about investor demands for quarterly earnings – and also points out that “less reporting doesn’t mean less work” – so it’s unlikely our field will fade into oblivion and only be relevant 1-2 times per year. On the other hand:
The biggest losers, people said, may be for-hire professionals called in on an ad-hoc basis to help pull quarterly earnings together, including corporate lawyers and auditors.
In response to the SEC’s 2019 request for comment on this issue, the Society for Corporate Governance filed a report showing that the costs associated with lawyers and accountants were among the most common concerns.
The article says that providers of financial data will also need to adapt.
For now, I’m predicting that if the SEC takes action, “less reporting doesn’t mean less work” – but also “there’s probably a way to do this better.” In his blog, Dave cited to letters from the 2019 request for comment on this issue. Those comments gave reasons and ideas for how information and related disclosure issues will continue to flow – even if the framework isn’t exactly the same as what we have right now.
For example, as this recent Cooley memo points out, companies may need to rethink executive compensation disclosures that currently can appear in Form 10-Qs and would otherwise need to be disclosed in a Form 8-K. As Dave mentioned, companies would also need to give serious thought to insider trading and securities offerings issues.
In a nutshell, “private ordering” can be efficient for some – but may create extra headaches for others.
