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Staff Bulletin Issued for Exclusion of Shareholder Proposals

Updating guidance for companies wishing to exclude shareholder proposals from their proxy filings, the Securities and Exchange Commission (“SEC”) has published Staff Legal Bulletin (SLB) No. 14H, Shareholder Proposals’ which is the conclusion of a months-long internal review of Rule 14a-8(i)(9) of the Securities Exchange Act of 1934.

Rule 14a-8(i)(9) allows companies to leave out shareholder proposals if they conflict with a management proposal and had been applied regularly in recent years. In regard to applying the rule, the SEC’s Division of Corporate Finance said that any review concerning whether a shareholder proposal can be excluded should focus on whether a direct conflict exists between the management and shareholder proposals.

Based on the guidance of SLB No. 14H, the SEC’s “no-action” letters are likely to be distributed less frequently for resolutions backed by shareholders. Rather, the agency will focus on whether a shareholder could reasonably vote for both the management and shareholder proposals.