As anticipated, the U.S. Securities and Exchange Commission (the “SEC”) has proposed to rescind Rule 14a-8 under the Securities Exchange Act of 1934. The SEC has also proposed to close the Rule 14a-4(c) “loophole,” which has inadvertently allowed shareholders who file their own proxy materials to add multiple shareholder proposals to a company’s proxy card. The rescission of Rule 14a-8 and the closure of the Rule 14a-4(c) loophole would mean that shareholders would need to turn to a company’s governing documents to propose business at an annual meeting. With the exception of Texas, which last year adopted ownership and solicitation requirements for shareholder proposals, no other state has enacted legislation governing shareholder proposals.

Rule 14a-8 will likely remain effective for most if not all of the 2026-27 proxy season, and the proposed rescission could be challenged in the courts. However, the SEC has already discontinued responding to all no-action requests related to Rule
14a-8, although companies are still required to notify the SEC of their decision and basis for excluding a shareholder proposal. With the SEC no longer substantively adjudicating shareholder proposal exclusions for the second year running, companies will need to continue making an independent judgment as to whether there is a reasonable basis to exclude a proposal. Last year, shareholder proponents filed six lawsuits contesting the exclusion of their proposals. Those lawsuits resulted in three settlements that led to the inclusion of the proposal in the company’s proxy statement and one successful preliminary injunction.

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