As we noted in this Cooley Alert, state law and governing documents would take on greater significance if the SEC was to adopt its proposal to rescind Rule 14a-8. Texas has already enacted an opt-in statutory framework addressing shareholder proposal rights more broadly. In Delaware, whether shareholders have an inherent right to bring precatory proposals remains unsettled – and indeed, it looks like that issue might be addressed by the Delaware General Assembly in the near term in an effort to provide greater certainty for Delaware corporations and their shareholders.
This statement from the Council of the Corporation Law Section of the Delaware State Bar Association – the group that typically kicks off the review of the state’s corporate statutes each year for possible changes – was recently posted: “The U.S. Securities and Exchange Commission recently proposed the repeal of Rule 14a-8 of the Securities Exchange Act of 1934. The Council of the Corporation Law Section of the Delaware State Bar Association is incorporating the potential repeal into its annual review of Delaware’s corporate statutes. From this review, the Council may formulate proposed statutory amendments. If approved by the Corporation Law Section and the Executive Committee of the DSBA, the proposed amendments are recommended to the Delaware General Assembly.”
This is a fairly generic statement that doesn’t indicate which direction the Council might go with its recommendations, but it does show that there is a good possibility that Delaware might make changes to shareholder rights in the shareholder proposal area next year.
In terms of timing, the Delaware General Assembly adjourns typically by June 30th, which then leaves a one-month window before the annual amendments become operational after the Governor signs the law – with statutory changes to the Delaware General Corporation Law often becoming effective on August 1st…
Authored by
Broc Romanek