SEC Proposes to End Federal Shareholder Proposal Rule and Modernize Proxy Solicitation

On September 16, 2026, the Securities and Exchange Commission (SEC) made two proposals that will impact public company processes:

1. Rescinding Rule 14a-8 in its entirety and amending Rule 14a-4(c) to expand the circumstances under which companies may exercise discretionary voting authority on shareholder proposals not included in their proxy materials.
   
   If adopted, the rescission would eliminate the federal rule governing inclusion of shareholder proposals in company proxy materials, leaving such determinations to state law or, if permitted by state law, to companies.
   
   
2. Modernizing the proxy solicitation process, aiming to update rules that have not been meaningfully amended in decades. Key amendments include eliminating the requirement that companies deliver an annual report to security holders, eliminating the delivery deadline for proxy statements incorporating documents by reference, eliminating the requirement to file Notices of Exempt Solicitation and shortening the minimum broker search period from 20 business days to five business days. See the Appendix for a detailed description of these technical amendments.
   
   If adopted, the proposal would reduce compliance burdens and eliminate redundancies in light of technological advances and the availability of EDGAR.

Comments to both proposals are due 60 days after publication in the Federal Register.

Rescission of Rule 14a-8

History of Rule 14a-8

Adopted in 1942, Rule 14a-8 allows shareholders to have their proposals included in company proxy statements, subject to certain eligibility and procedural requirements. The rule also sets forth 13 substantive bases for exclusion, which for decades caused companies to engage in a time-consuming process with the SEC to obtain no-action relief to rely on any basis for exclusion.

More recently, the Division of Corporation Finance changed its long‑standing practices in this area, declining to respond to the vast majority of shareholder proposal no-action requests for the 2025-2026 proxy season (with the limited exception of requests under Rule 14a-8(i)(1)) and announcing in August 2026 that it would discontinue responding to Rule 14a-8 no-action requests entirely.

Proposed Amendments

The SEC proposes to rescind Rule 14a-8 in its entirety, removing any obligation under federal law for public companies to include qualifying shareholder proposals in their proxy materials. The rule’s ownership thresholds, procedural requirements and substantive exclusions would also be removed. If adopted, only state law would determine the circumstances under which shareholder proposals should be included in a company’s proxy materials and how shareholder proposals may be brought before a meeting of shareholders.

The proposal is made principally on the grounds that the rule exceeds its statutory authority and, to a lesser extent, for policy reasons. In particular, the proposal states that Section 14(a) of the Securities Exchange Act of 1934, as amended, authorizes the SEC to regulate how votes are solicited and what information is disclosed, but not the substantive scope of shareholder voting rights, which are governed by state law.

The proposing release notes that Rule 14a-8 “has come to operate not as a procedural mechanism to facilitate shareholders’ rights under State law through the proxy process, but as a substantive Federal overlay that improperly intrudes into matters of State law by dictating that companies include (or allowing them to exclude) certain shareholder proposals in the companies’ proxy materials.”

Practical Implications for Public Companies

Companies should continue planning for the 2027 proxy season under the current rules while the proposed rescission remains subject to the rulemaking process. While we do not recommend any changes to the organizational documents of companies at this time, companies should consider the following:

• Companies should review their advance notice bylaw provisions for changes in the event the proposal is adopted, and in light of the potential for increases in shareholder proposals that are submitted outside of Rule 14a-8.
• Companies should expect a period of legal uncertainty as state law is not always clear as to whether a matter is a proper subject for shareholder action under state law. Under Delaware law, for example, it is unclear whether the Delaware General Corporation Law permits precatory proposals. Such questions will likely have to be addressed in the legislature or in state court.
• Over the short and longer term, companies should monitor developments in rulemaking relating to shareholder proposals and Rule 14a-8. Comments are already being submitted on the proposed repeal, so any final rulemaking may not reflect the proposal. In addition, as part of the existing Rule 14a-8 process, shareholder engagement and other activities, we may see the shareholder community advocate for companies to adopt so-called “proposal access” provisions in their bylaws that replicate the Rule 14a-8 framework.

Additionally, to the extent state laws change in response to the proposed rescission of Rule 14a-8, state laws allowing inclusion, or exclusion, of shareholder proposals in company proxy materials may serve to differentiate states as preferred jurisdictions to incorporate or reincorporate.

The Texas Business Organizations Code, for example, permits eligible companies to require that in order to submit a shareholder proposal (other than director nominations), shareholders must have continuously owned at least $1 million in voting shares or 3% of the company’s voting stock for at least six months before the date of the meeting and solicit the holders of shares of at least 67% of the voting power of shares entitled to vote on the proposal. On the other hand, Delaware law currently does not provide such access to proxy statements, although the Delaware State Bar Association, in response to this proposed rulemaking, stated that it is incorporating the potential repeal of Rule 14a-8 into its annual review of the state’s corporate statutes.

Amendments to Rule 14a-4(c)

Proposed amendments to Rule 14a-4(c) would expand companies’ discretionary voting authority over shareholder proposals submitted outside of the Rule 14a-8 process.

Currently, a company may exercise discretionary authority over timely received proposals submitted outside Rule 14a-8 (i.e., under a company’s advance notice bylaws), unless the proponent delivers its own proxy materials to holders of at least the percentage of shares required to carry the proposal. This framework can pressure companies to include proposals on their own proxy cards even when not required, particularly following adoption of the universal proxy rules, which enable “zero-slate” campaigns.

Proposed Amendments

The SEC proposes to amend Rule 14a-4(c) to eliminate the solicitation threshold, permitting companies to exercise discretionary voting authority over timely received proposals regardless of whether the proponent conducts its own solicitation. Under the proposed amendments, a company would be able to exercise discretionary voting authority with respect to timely received proposals from shareholders under its advance notice bylaws if it includes:

1. In the proxy statement, a brief description of the matter and how the company intends to vote through its exercise of discretionary authority,
2. On the proxy card, a cross-reference to the location of this disclosure in the proxy statement, and
3. A check box on the proxy card that, if checked by a shareholder, would prevent the company from exercising its discretion.

A company could use a single check box covering all nonmanagement proposals subject to discretionary voting authority, although it could voluntarily provide separate check boxes. The SEC notes these amendments have independent justifications even if Rule 14a-8 is not rescinded.

Practical Implications for Public Companies

If this proposal is adopted, companies will need to update their proxy cards and proxy statement disclosure to accommodate this new mechanism. Under the amendments, each shareholder would decide independently whether to grant or withhold that authority.

Companies should note that the default, if the box is left unchecked, grants the company discretionary authority, which may draw attention from institutional investors and proxy advisory firms. Companies facing a zero-slate campaign with proposals likely to receive significant support may still choose to include them on their own proxy cards, or would need to actively solicit shareholders to return a later-dated company card since the last proxy card submitted is the one that controls.

Conclusion

Together, these proposals would represent a substantial restructuring of the federal shareholder-proposal and proxy-solicitation framework. The proposed rescission of Rule 14a-8 would eliminate the federal shareholder proposal regime, leaving such matters to state law and company governing documents. The proposed amendments to Rule 14a-4(c) would give companies greater discretionary voting authority over shareholder proposals submitted outside the Rule 14a-8 process. Moreover, the proxy modernization proposal, outlined in the Appendix, would streamline compliance by eliminating outdated delivery and filing requirements while giving companies greater flexibility in planning shareholder meetings.

We encourage companies to evaluate the potential impact on their governance practices, advance notice bylaws, and proxy processes and to contact us with any questions.

Appendix: Key Changes in the SEC Proxy Solicitation Modernization Proposal

The following table summarizes the key changes proposed in the SEC’s September 16, 2026 release on the modernization of proxy solicitation rules.