The Advisors' Blog

I shared a reminder last fall that many companies will need to include a “say-on-when” proposal in this year’s proxy statement. But we all make mistakes! Along with other “say-on-frequency” reminders, this Freshfields blog shares practical steps to take if you forgot to include the proposal, after you pick your stomach up off the floor:

If a company inadvertently omits the say-on-pay frequency proposal from the definitive proxy statement for its annual meeting, there may be a simple way to rectify the oversight so long as the meeting has not yet occurred. Assuming the company does not consider the addition of the say-on-pay frequency proposal a material change to the proxy statement, a company should be able to prepare a short proxy statement supplement and an amended proxy card, filed with the SEC as definitive additional soliciting materials, without the time and expense of a full proxy statement update. In addition to amending or supplementing proxy materials, a company should also be sure to update any electronic voting platforms or portals to include the previously omitted proposal. If the addition of a say-on-pay frequency proposal is considered a material revision, then the company will need to prepare a full amended proxy statement and proxy card.

One key question in evaluating options is timing:

– For a company that relies on the SEC’s “e-proxy” rules to avoid printing and mailing a full set of proxy materials to shareholders, are you already in the 40-day period before the annual meeting is scheduled to be held? If so, it will no longer be sufficient to file the amendment or supplement with the SEC and circulate a Notice of Internet Availability to shareholders. In such a situation, in order to avoid delaying or adjourning the meeting, the amendment or supplement must instead be printed and mailed, assuming there is sufficient time for the materials to be received by shareholders as discussed below. Otherwise, the company will need to set a new meeting date, which may also necessitate fixing a new record date and conducting another broker search.

– Is there sufficient time before the meeting to comply with the notice requirements under the company’s governing documents and the laws of its jurisdiction of organization? If there is not, there may be no choice but to set a new meeting date or adjourn the meeting, which may also necessitate fixing a new record date and conducting another broker search—themselves additional sources of delay.

– Was the company required to file a preliminary proxy statement due to the inclusion of “non-routine” proposals, such as a charter amendment? If a preliminary proxy statement was required, a company should consider whether the addition of the omitted proposal to the proxy statement would be considered a fundamental change in the proxy materials that would require another 10-day waiting period before amended definitive materials can be provided to shareholders pursuant to Rule 14a-6(a). Formal guidance on what constitutes a fundamental change is limited, and the determination for any company will depend on its specific facts and circumstances. However, because a say-on-pay frequency proposal would not itself have required a preliminary proxy statement to be filed and is advisory in nature, we believe there are often reasonable grounds to conclude that adding a say-on-pay frequency proposal would not constitute a fundamental change to a company’s proxy statement.

If a company chooses to file a proxy statement supplement, a few matters should be covered. In addition to providing the omitted say-on-pay frequency proposal and an amended form of proxy card, the supplement should also include an amended notice of annual meeting that includes the new proposal, instructions on how to vote and how to revoke or modify previously cast votes in light of the change, what happens to previously cast votes that are not revoked and disclosure about the effects of votes on the new proposal, such as the effect of abstentions and broker non-votes.

An inadvertently omitted say-on-pay frequency proposal can cause consternation, and fixing the issue requires a company to act quickly under pressure. Nevertheless, with thoughtful analysis and consultation with counsel, a company can often address a slip-up with minimal delay and expense.

– Liz Dunshee