SEC Shifts Shareholder Proposal Review Process for 2025-2026 Proxy Season

The Securities and Exchange Commission’s Division of Corporation Finance has announced a significant shift in how it will handle shareholder proposal exclusion requests during the current proxy season, marking a notable change in corporate governance oversight that will directly impact boards of directors nationwide.

Private company directors serving on public boards, or those considering such positions, should understand this significant procedural change and its impact on board decision-making processes.

The Key Change

For the 2025-2026 proxy season, the Division will no longer respond to most no-action requests from companies seeking to exclude shareholder proposals from their proxy materials under Rule 14a-8. The only exception is for exclusion requests under Rule 14a-8(i)(1), which relates to proposals that are not proper subjects for shareholder action under state law.

This represents a departure from decades of practice where companies could seek—and receive—staff guidance on whether proposed exclusions were justified under various provisions of Rule 14a-8.

Why the Change?

The Division cited three primary reasons for this procedural shift:

• Resource Constraints: Following a lengthy government shutdown, the Division faces significant resource and timing pressures, with a large volume of registration statements and other filings requiring immediate staff attention.
• Existing Guidance: The Division noted there is already an extensive body of guidance from both the Commission and staff available to companies and shareholder proponents, suggesting parties can rely on existing precedent.
• Self-Certification Approach: The new process shifts responsibility to companies and their counsel to determine whether they have a reasonable basis for exclusion, based on Rule 14a-8 provisions, prior published guidance, and judicial decisions.

What This Means for Boards

This change places greater responsibility on corporate boards and their legal advisors to evaluate shareholder proposals and make exclusion decisions without the safety net of SEC staff review. Boards will need to:

• Conduct more thorough internal analysis of whether proposals can be properly excluded
• Rely more heavily on legal counsel with expertise in securities law and corporate governance
• Accept greater uncertainty about whether exclusion decisions will withstand legal challenge
• Document their reasoning more carefully when deciding to exclude proposals

The New Process

Companies that wish to exclude shareholder proposals (other than under Rule 14a-8(i)(1)) and want a response from the Division must now:

1. Submit notification pursuant to Rule 14a-8(j) no later than 80 calendar days before filing a definitive proxy statement
2. Include an unqualified representation that the company has a reasonable basis to exclude the proposal based on Rule 14a-8 provisions, prior published guidance, and/or judicial decisions
3. Receive a limited response from the Division stating only that, based solely on the company’s representation, the Division will not object to the omission

Importantly, the Division will not evaluate the adequacy of the company’s representation or express any view on the merits of the exclusion basis.

The Rule 14a-8(i)(1) Exception

The Division will continue to review and respond to no-action requests related to Rule 14a-8(i)(1), which allows exclusion of proposals that are not proper subjects for shareholder action under applicable state law.

The Division explained this exception exists because of “recent developments regarding the application of state law and Rule 14a-8(i)(1) to precatory proposals,” noting there is not yet a sufficient body of guidance for companies and proponents to rely on in this area.

Timeline and Scope

This new approach applies to:

• The current proxy season (October 1, 2025 – September 30, 2026)
• Pending no-action requests submitted before October 1, 2025 to which the Division has not yet responded

Companies that previously submitted requests relying on bases other than Rule 14a-8(i)(1) and wish to receive a response must submit a new notice including the required representation.

Implications for Private Company Directors

While Rule 14a-8 applies primarily to public companies, this development has important implications for private company board members:

• Governance Best Practices: The shift toward self-assessment and greater board responsibility for shareholder proposal decisions reflects broader trends in corporate governance that affect private companies as well.
• Transition Considerations: Private company directors serving on public boards, or those considering such positions, should understand this significant procedural change and its impact on board decision-making processes.
• Precedent and Guidance: The extensive body of SEC guidance and judicial decisions referenced in this announcement provides valuable insights into shareholder rights and board responsibilities that can inform governance practices at private companies.

Looking Ahead

This procedural change represents a significant shift in the regulatory landscape for corporate governance. Boards will need to adapt by:

• Strengthening internal governance expertise
• Building stronger relationships with experienced securities counsel
• Developing more robust processes for evaluating shareholder proposals
• Staying current on judicial decisions and SEC guidance regarding Rule 14a-8

The Division indicated it will continue this approach “until such time as it determines there is sufficient guidance available” for Rule 14a-8(i)(1) matters, suggesting the possibility of future adjustments based on experience with the new process.

Questions and Resources

Companies with questions about this announcement should contact:

• Division of Corporation Finance, Office of Chief Counsel
  • Email: shareholderproposals@sec.gov
  • Phone: 202-551-3500
• Division of Investment Management (for investment companies)
  • Email: IMshareholderproposals@sec.gov
  • Phone: 202-551-6921

All notices must be submitted using the SEC’s online Shareholder Proposal Form.