Securities Lawyer 101 l Brenda Hamilton

Securities Lawyer 101 l Brenda Hamilton

Wednesday, November 27, 2013

The SEC’s Proxy Rules

Most public companies hold a stockholders’ meeting annually and hold special meetings to vote on special corporate actions such as name changes and mergers.  Shareholder voting on takes place either in person or by proxy.
Proxy solicitation is governed by a number of rules and regulations including: (i) state corporate law; (ii) stock exchange listing requirements; (iii) SEC proxy rules; and (iv) the issuers’ articles and bylaws.

Issuers who have a class registered under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), are subject to the proxy rules. The SEC’s proxy rules are loccated in Section 14(a) of the Exchange Act.
The Section 14 Proxy Rules govern the disclosures required to solicit shareholders’ votes for certain corporate actions such as the election of directors and approving accountants.
Shareholders receive information about corporate actions and shareholder meetings in either a Proxy Statement on Schedule 14A or an Information Statement on Schedule 14C.  Common corporate actions requiring Schedule 14A or 14C filings include name changes, reverse mergers, stock splits, domicile changes, corporate reorganizations and other events requiring a vote of the issuer’s shareholders.
SEC Schedule 14A Informational Requirements
The information contained in proxy materials is provided to the issuer’s shareholders and the SEC prior to any solicitation to ensure compliance with the disclosure rules. A Preliminary Schedule 14A is subject to review by the SEC’s Division of Corporation Finance.  If no comments are rendered then the issuer may file its Definitive Information Statement 10 days after the filing of its Preliminary 14A. Solicitations on Schedule 14A, whether by management or by shareholder groups, must disclose all material facts concerning the issues on which holders are asked to vote. The disclosure information is provided to the public and the SEC on Schedule 14A.
SEC Schedule 14C Informational Requirements
When a shareholder vote is not being solicited and action has been taken by the written consent of majority shareholders in lieu of a shareholder meeting, an issuer may satisfy its Section 14 requirements by filing an information statement with the SEC on Schedule14C and mailing the Schedule 14C to its shareholders.
As with the proxy solicitation materials filed in Schedule 14A, Schedule 14C information is subject to SEC review to ensure all material facts are disclosed.  The SEC may render comments to the Information Statement on Schedule 14C and request modified or additional disclosures. Unlike a Schedule 14A Proxy Solicitation, a Schedule 14C Information Statement does not solicit or request shareholder approval. Instead, the Schedule 14C provides investors with information about important corporate actions that have been approved by the issuer’s majority shareholders. Ten days after filing a Preliminary Information Statement on Schedule 14C, if no SEC comments are received, the issuer may file its Definitive Information Statement.
The information required by Schedule 14C is substantially the same as that found in a Schedule 14A, other than the disclosures related to voting. Using Schedule 14C is less time consuming, since no shareholder approval is being sought. As such, most issuers prefer to use the Schedule 14C Information Statement rather than the Schedule 14A proxy solicitation.
Solicitation under Rule 14a
Whenever an issuer is seeking shareholder approval by soliciting votes, Schedule 14A is required.  Rule 14a-1(l) defines a “solicitation” for purposes of the proxy rules as:
♦ any request for a proxy whether or not accompanied by or included in a form of proxy;
♦ any request to execute or not to execute, or to revoke a proxy; or
♦ the furnishing of a form of proxy or other communication to security holders under circumstances reasonably calculated to result in the procurement, withholding or revocation of a proxy.
The bottom line is if an issuer requests a shareholder to consent to action, it is soliciting that shareholder’s approval and, accordingly, the issuer must comply with Schedule 14A’s proxy solicitation requirements.
For further information about this article, please contact an SEC attorney at (561) 416-8956 or by email at info@securitieslawyer101.com. This memorandum is provided as a general informational service to clients and friends of Hamilton & Associates Law Group and should not be construed as, and does not constitute, legal and compliance advice on any specific matter, nor does this message create an attorney-client relationship. For more information concerning the rules and regulations affecting the use of Rule 144, Form 8K, FINRA Rule 6490, Rule 506 private placement offerings, Regulation A, Rule 504 offerings, Rule 144, SEC reporting requirements, SEC registration on Form S-1 and Form 10, Pink Sheet listing, OTCBB and OTCMarkets disclosure requirements, DTC Chills, Global Locks, reverse mergers, public shells, go public direct transactions and direct public offerings or please contact Hamilton and Associates or visit http://www.gopublic101.com Please note that the prior results discussed herein do not guarantee similar outcomes.
Hamilton & Associates | Securities Lawyers
Brenda Hamilton, Securities Attorney
101 Plaza Real South, Suite 202 North
Boca Raton, Florida 33432
Telephone: (561) 416-8956
Facsimile: (561) 416-2855
www.gopublic101.com

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