March 7, 2019
Say-on-Frequency for Smaller Reporting Companies
– Broc Romanek
Here’s a reminder for smaller companies from Skadden Arps:
Most smaller reporting companies held initial shareholder say-on-frequency votes in 2013, when the requirements went into effect. Given that say-on-frequency votes must be submitted at least once every six years, the 2019 proxy season will mark the second time such votes are required for those companies. The proxy cards from those companies must provide shareholders the option to vote for one-, two- or three-year periods between say-on-pay votes or to abstain from voting.
Failure to include a say-on-pay frequency vote once every six calendar years may expose a company to potential SEC enforcement action and other risks, such as a derivative shareholder lawsuit. If a company were to fail to include a required say-on-frequency vote, such a mistake could be corrected by filing a proxy statement amendment or a revised proxy statement on EDGAR and posting the material on the same website where the original proxy materials were posted, which also should be disseminated to shareholders, either by circulating a new Notice of Internet Availability of Proxy Materials or by mailing the supplemental or revised material. The amendment or revised proxy statement can be in the form of a cover page that explains the error and provides the correct information, or it can be a restatement of the entire proxy statement containing the corrected information and an explanatory note regarding the error and corrections made.