December 8, 2021Client Alert

SEC Adopts Universal Proxy Rule

On November 17, the Securities and Exchange Commission (“SEC”) adopted the universal proxy rule that was originally proposed in 2016. The final rule requires the use of a universal proxy – essentially a ballot – any time there is a contested director of elections for a reporting company that is subject to the proxy rules.


Currently, when there is a contested election of directors the public company will prepare its own proxy card requesting shareholders’ proxy to vote for the company’s slate of nominees and the supporters of the opposing nominees will do the same. The separate proxy cards make it difficult for shareholders to split their votes among nominees from each group without attending the meeting and voting in person.

The New Rule – Universal Proxy

The new rule, which applies to all contested elections of directors at meetings held after August 31, 2022, provides for a universal proxy card that includes all nominees presented by management and the company’s shareholders at a shareholder meeting. Each side is allowed to design and prepare its own card, but all nominees must be listed in a clear, neutral presentation. Additionally, there are new notice and filing requirements for all parties soliciting proxies, and shareholders soliciting proxies are required to solicit holders of at least 67% of the voting power of shares entitled to vote in the election.

Registered investment companies and business development companies are not subject to the universal proxy rules.

Voting Standards

The final rules also require that “against” and “abstain” voting options be provided on a proxy card for all director elections (not only contested elections) where such options have legal effect under state law. That means this requirement will apply whenever state law or a company’s charter documents require directors to receive a majority, rather than a mere plurality, of votes. To ensure that shareholders understand the effect of those options, the new rules require disclosure in the proxy statement about the effect of all voting options provided. This will require careful attention in the drafting of the first proxy statement following effectiveness of the rule.

Michael Best & Friedrich has attorneys in its Securities & Capital Markets team who can advise issuers on complying with the proxy rules, including implementation of the universal proxy for contested elections occurring after August 31, 2022. Please do not hesitate to contact a member of our team for more information.

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