One of the surprises of the 2018 proxy season was the use of Notices of Exempt Solicitation by shareholders that almost certainly did not meet the $5 million holding threshold that would require filing under Exchange Act Rule 14a-6(g).
Rule 14a-6(g) requires a person who owns more than $5 million of the company’s securities and engages in a solicitation without seeking to collect, or act as, a proxy to file solicitation materials with the SEC.
At AES, shareholder and frequent proponent John Chevedden submitted a shareholder proposal to lower the threshold for shareholders to call special meetings to 10%. The company included in its proxy statement a management proposal to ratify the existing 25% threshold for shareholders to call special meetings contained in the company’s bylaws. This allowed the company to seek, and receive, no-action relief from the Securities and Exchange Commission (SEC) on the basis that the management and shareholder proposals conflicted. Chevedden then filed a “shareholder memo” criticizing management and urging shareholders to vote against the management proposal as a Notice of Exempt Solicitation. Although shareholders were able to view the memo, as Notices of Exempt Solicitation appear on a company’s EDGAR page on the SEC’s website, the company proposal ultimately passed, receiving approximately 60% shareholder support.
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