Proxy solicitations

A proxy solicitation contains materials about the issuing entity that investors need to make informed decisions about shareholder votes. This issuance is required for publicly-held companies.

A requirement for every publicly-held company is to conduct at least one shareholders meeting per year. There may be a need for additional meetings, if the company needs shareholder approval of additional items, such as a change in the articles of incorporation or an increase in the number of directors. The circumstances of these meetings are governed by the laws of the state in which a company is incorporated. State law may, for example, require that meetings be conducted within a certain number of days of the fiscal year end.

The Proxy Solicitation

Before a shareholders meeting is held, the company must issue a proxy solicitation to its voting shareholders. This solicitation contains information about the company, and also notes all items requiring a shareholder vote. The exact content of the proxy solicitation document is governed by Rule 14a-3 of the Securities and Exchange Commission (SEC). The rule defines a number of information types to include in the solicitation, including:

  • Information about where and when the meeting will be held
  • The date by which shareholders must submit their proposals for inclusion in the solicitation
  • The method for revoking proxies, if allowed
  • Any rights of appraisal for dissenters
  • Any interests that the company's directors and officers may have in items being voted upon
  • A summarization of the voting securities outstanding and who owns them
  • The date of record that is used to determine which shareholders can vote
  • Any relationship that directors may have with the company
  • The compensation paid to officers and directors
  • The amounts paid to the company's auditors for auditing and other services
  • A description of any benefit, bonus, pension, or similar plan to be voted upon
  • A description of any securities that will be authorized to be issued
  • A description of any property that the company plans to dispose of or acquire
  • A description of any proposed changes to the company's articles of incorporation
  • The annual report or Form 10-K (if the solicitation is for the annual meeting)

All of the preceding information is issued to shareholders along with a proxy card. The card is used by shareholders to vote for or against company proposals, or to abstain from them.

SEC Approval of the Proxy

If the solicitation includes voting on topics other than the election of directors or the approval of auditors, it must first be approved by the SEC. If the SEC does not respond within 10 days that it is planning to comment on the solicitation, then the company can issue it to shareholders. Otherwise, the SEC has 30 days in which to comment.

Applicable Proxy Dates

An essential ingredient of the proxy solicitation is a set of dates, which are:

  • Record date. The date on which the company identifies which shareholders are eligible to vote at the shareholders meeting. It is usually not more than 60 days prior to the date of the meeting.
  • Mailing date. The date on which the proxy materials are to be mailed.
  • Meeting date. The date of the shareholders meeting. This is normally limited by state law to be at least 10 days after the mailing date. The interval is usually a number of weeks longer, to give shareholders time to submit their proxy cards.

Vote Tallying

Completed proxy cards are normally tallied by a company's stock transfer agent, though other parties or the company itself can do so. The stock transfer agent is a good choice, since this entity has procedures in place for recording and aggregating the information on proxy cards. This information is then summarized and presented at the shareholders meeting. The summary is also included in the meeting minutes.