Proxy Solicitations

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Every public company holds at least one shareholder meeting per year, and may also need to conduct additional shareholder meetings for the approval of selected items, such as a new class of securities or a change in the company’s articles of incorporation. These meetings are governed by the law of the state in which a company is incorporated, sometimes requiring that an annual meeting be held within a specified time period following the company’s prior annual meeting.

The Proxy Solicitation

Prior to that meeting, a company must issue a proxy solicitation to its voting securities holders, disclosing a broad range of information about both the company and any proposals it wishes to bring to a vote. The proxy itself is any shareholder consent or authorization regarding the casting of that shareholder’s vote, which is accompanied by detailed solicitation materials.

The SEC’s Rule 14a-3 identifies the types of information that must be included in the materials used for proxy solicitations. The general categories of this information are as follows:

The date, time, and place of the meeting
The deadline for submitting shareholder proposals for inclusion in the proxy statement and form of proxy
State whether proxies can be revoked, and the method for doing so
Explain any dissenters’ rights of appraisal for any proposals to be voted upon
The interests of directors and officers in the matters to be voted upon
Itemize all voting securities and their principal holders
The record date for determining which shareholders can vote
If directors are being elected, note their relationship to the company
The compensation of directors and officers
The fees billed by the auditor to the company for auditing, information systems design and implementation, and all other services
The details of any bonus, pension, benefits, or similar plans to be voted upon
The details of any securities to be authorized for issuance, or existing ones to be modified
The details for any extraordinary transactions, such as mergers and acquisitions
The details of any property to be acquired or disposed of
The details of any changes to the articles of incorporation or charter
If this is for the annual shareholder meeting, then include the company’s annual report (for which the most recent Form 10-K can be used)

The Proxy Card

The above materials are issued alongside a proxy card. The proxy card is essentially a voting card, which clearly states the name of the security holder being solicited, the matters to be voted upon, and a means for approving, disapproving, or abstaining from each matter.

SEC Approval of the Proxy

Once a company has assembled all materials for the proxy mailing, it sends the materials to the SEC for approval, but only if the materials involve voting for issues other than the election of directors, the appointment of auditors, or the approval of a plan or related amendments. The SEC has 10 days to respond that it plans to comment; if so, the SEC usually issues a comment letter within 30 days. If the SEC does not respond within 10 days, then the company can proceed with printing and mailing the proxy materials to its stockholders. If there is no need to submit the information to the SEC in advance, then the company can print and mail the proxy materials, and file them with the SEC at the same time.

Applicable Proxy Dates

Also, the board of directors must set a record date, which is used to identify those shareholders eligible for notice of and voting at an annual meeting. This record date will vary, depending on the state law under which a company incorporates, but generally cannot be more than 60 to 70 days prior to the meeting date. The directors must also fix a mailing date for the proxy materials, and a stockholder meeting date. Again, the number of days notice for the meeting date will vary by state law, but is typically required to be at least 10 days after the mailing date. Many companies mail proxy materials up to a month before the meeting date, in order to give sufficient time for stockholder votes to be returned in the mail.

Vote Tallying

A third-party printer almost always creates the proxy materials. The printer forwards them to Broadridge, Inc., which mails them to the stockholders of record. Broadridge can tally votes that are mailed back by stockholders, or the company or its stock transfer agent can do so. Once all votes have been received, the designated person or entity creates a summary-level report of votes cast, certifies that the information is correct, and issues a report on it at the stockholders’ meeting.