On September 16, 2026, the Securities and Exchange Commission (SEC) issued two proposals that, if adopted, would represent significant changes to the federal proxy rules for U.S. public companies.

The first proposal would eliminate Rule 14a-8 under the Securities Exchange Act of 1934 (Exchange Act). Rule 14a-8 currently requires companies to include qualifying shareholder proposals in their proxy materials and has been part of the federal proxy rules for more than 80 years. The proposal would also give companies greater discretion to vote proxies on shareholder proposals that are not included in their proxy materials.

The second proposal is more practical – it would update several requirements that the SEC views as outdated in light of EDGAR and modern electronic communications. Most notably, it would eliminate the obligation to deliver a separate annual report to shareholders and shorten the minimum broker search period from 20 business days to 5 business days before the record date for a shareholder meeting.

The public comment period for these proposals will remain open for 60 days following publication in the Federal Register, following which the SEC may approve, modify or abandon the proposed changes. Thus, until any changes are adopted, companies should plan for the 2027 proxy season under the current rules.

Rescission of Rule 14a-8

Rule 14a-8, written in a Q&A format, requires shareholders to include certain shareholder proposals in company proxy statements, subject to a list of allowed exclusions, which are often the subject of dispute between companies and the proponents. If Rule 14a-8 is rescinded, federal law would no longer determine which shareholder proposals a company must include in its proxy materials. That question would be left to the law of the company's state of incorporation and, where state law allows, to the company's charter and bylaws.

The SEC's main argument is that it lacks the authority to regulate this area. In its view, Section 14(a) of the Exchange Act allows the SEC to regulate how proxies are solicited and what shareholders must be told. It does not allow the SEC to decide which matters shareholders are entitled to vote on, which is a question of state corporate law.

The SEC also offers policy reasons, notably the rising costs of the process for companies and the fact that most proposals receive little shareholder support. It also notes that a small group of repeat proponents accounts for most submissions. Finally, it says the federal rule has discouraged states from developing their own approach to shareholder proposals.

This proposal is a continuation of a process in which the SEC staff has largely stopped reviewing company requests to exclude shareholder proposals over the past year.

Even if the SEC will rescind the rule, shareholder proposals will not disappear. Proponents are likely to submit proposals directly under state law and company advance notice bylaws, commonly called "floor proposals". Most state statutes and company governing documents say very little about these proposals, including whether they must appear in the company's proxy materials. We expect states, and eventually companies, to fill that gap.

Amendments to Rule 14a-4(c)

Under the current rules, a shareholder can prevent a company from voting proxies at its discretion on a floor proposal. To do so, the shareholder sends its own proxy materials to shareholders who carry enough shares to pass the proposal. As a result, companies often feel they have no choice but to include these proposals on their own proxy card so that they can counteract the proponents’ proxies.

Under the proposed amendments, a company could leave a timely submitted floor proposal off its proxy card and still vote the proxies it receives on that proposal, provided that it:

• summarizes the proposal in its proxy statement, together with the way it plans to vote the proxies;
• directs shareholders, on the proxy card, to that summary in the proxy statement; and
• gives each shareholder the option, through a box on the proxy card, to deny the company discretionary authority over its shares.

One check box may cover all such proposals, although companies may choose to offer a separate box for each one. The practical result is that each shareholder, rather than the proponent, decides whether the company may vote that shareholder’s shares on the proposal. The SEC has stated it could adopt this change even if it keeps Rule 14a-8.

Modernization of the Proxy Solicitation Rules

The second proposal would:

• end the requirement to deliver or make available an annual report to shareholders, so that a proxy or information statement for a meeting at which directors are elected would only need to follow the filing of the company's Form 10-K (or an annual report furnished on EDGAR). The required contents of an annual report to shareholders substantially overlap with the required contents for an annual report on Form 10-K. Eliminating the annual report to shareholders as a separate required document would save companies preparation time and printing, mailing and webhosting costs;
• eliminate the stock performance graph requirement, except for investment companies. This currently required graph (other than for smaller reporting companies) illustrates the performance of an investment in the company’s stock over 5 years as compared to certain relevant stock indices. Eliminating the graph would save companies the time and costs of preparing such a graph while at the same time investors can readily obtain such information elsewhere;
• remove the 20-business-day advance delivery requirement for proxy statements that incorporate information by reference, with parallel changes to Forms S-4 and F-4. Shareholders can readily find incorporated documents without such advance notice - though many companies do not incorporate by reference into their proxy statements, this change could lead to shorter timing to plan shareholder meetings for those that do;
• eliminate Notices of Exempt Solicitation, both required and voluntary. This filing currently requires certain large shareholders to file a notice if they conduct certain written exempt proxy solicitations;
• shorten the minimum broker search period from 20 business days to five business days before the record date for a shareholder meeting. Companies are required under the proxy rules to ask record holders for the number of proxy materials needed by the record holders to forward to customers who are beneficial owners of the company. As a practical matter, this “broker search” typically takes only a couple of days so the 20 business day lead time has become outdated; and
• require contact details for a company representative on the cover page of Schedules 14A and 14C.

The broker search and delivery changes would allow companies to hold shareholder meetings on a shorter timeline.

What Companies Should Do Now

Companies subject to the U.S. proxy rules should:

• handle shareholder proposals for the 2027 proxy season under the current Rule 14a-8;
• review their advance notice bylaws and the rules of their state of incorporation on floor proposals;
• follow legislative developments, particularly in popular states of incorporation like Delaware, Nevada and Texas, before amending their governing documents;
• consider how the shorter broker search period and the removal of the 20-business-day delivery requirement could affect their meeting timelines;
• discuss the new proxy card check box and the shorter timelines with their proxy solicitor and transfer agent; and
• consider submitting comments to the SEC.

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If you would like further information regarding the SEC proposals discussed in this Client Alert or related shareholder proposal or proxy statement matters, please contact the lawyer at Sullivan & Worcester LLP with whom you regularly consult, or any of the lawyers listed above.

This Client Alert is provided for general informational purposes only and does not constitute legal advice.