Securities Law Blog

On December 28, 2023, Vice Chancellor Will of the Delaware Court of Chancery rendered an important decision in Kellner v. AIM ImmunoTech, Inc., which provides key guidance on advance notice bylaw provisions (“ANBs”). The Court found that four out of six of the amended ANBs at issue in the case were “overbroad, unworkable, and ripe for subjective interpretation by the Board,” and struck them down for running afoul of Delaware law. In so doing, Vice Chancellor Will noted the following about these four offensive ANBs:

Certain of the new rules governing beneficial ownership reporting on Schedule 13D and 13G take effect on Monday, February 5, 2024. Please refer to our Client Alert discussing in detail the new rules. The new filing deadlines that you should begin to take into consideration with respect to your ongoing securities acquisition programs are as follows:

On December 1, 2020, Nasdaq filed Proposed Rule 5605(f) with the U.S. Securities and Exchange Commission (“SEC”) to adopt new listing rules related to board diversity. If approved by the SEC, Proposed Rule 5605(f) would require all companies listed on Nasdaq’s U.S. exchange to publicly disclose their diversity statistics regarding their board of directors. Proposed Rule 5605(f) would also require all Nasdaq-listed companies to include a minimum number of individuals on their board of directors who self-identify in one or more of the following “Diverse” categories: female, underrepresented minority or LGBTQ+.

In a client alert issued by Olshan's Shareholder Activism Group last week, we reported that certain factions within the Delaware State Bar Association were attempting to fast track an amendment to Section 110 of the Delaware General Corporation Law that would allow Delaware corporations to postpone their annual meetings of stockholders in light of the COVID-19 pandemic.  We expressed serious concerns that the proposed amendment could be abused by corporations looking to postpone their annual meetings and disenfranchise stockholders under the pretense that such a delay is required due to COVID-19. Shortly after the release of our client alert, Governor John Carney issued on April 6 the tenth modification to his State of Emergency Declaration relating to COVID-19 intended to reduce the number of in-person stockholder meetings held by Delaware corporations in order to protect the health and safety of the civilian population in light of the pandemic. As discussed in this client alert, we believe the Governor's order is sufficient to allow corporations to address COVID-19 related logistical challenges they may be facing with respect to their meetings and there is no need for state legislators to rush to adopt a statutory amendment that could threaten stockholder rights.   

On February 3, 2020, Olshan’s Shareholder Activism Group issued a letter of comment to the Securities and Exchange Commission in response to its proposed amendments to the federal proxy rules released on November 5, 2019 that would condition the availability of certain existing exemptions from the information and filing requirements of the proxy rules for proxy voting advice businesses upon compliance with additional disclosure and procedural requirements.  The scope of our comments is limited to the severe shortcomings of the proposed rules in terms of their practical application in the “real world” of a proxy contest.  We have drawn upon our vast experience in advising on hundreds of contested solicitations to highlight the flaws inherent to the proposed rules. 

Institutional Shareholder Services (“ISS”), the leading proxy voting advisory firm, recently released its 2020 proxy voting guidelines updates for the U.S. and other jurisdictions (effective for meetings on or after February 1, 2020) following its annual global benchmark policy survey and comment period that ran from July 22, 2019 to October 18, 2019. ISS addressed various topics in its updated guidelines, which included three guideline revisions that are relevant to shareholder activism in the U.S. and are the focus of this client alert.

On August 21, 2019, the Securities and Exchange Commission (the “SEC”) (i) approved new guidance (the “Guidance”) regarding the proxy voting responsibilities of investment advisers under the Investment Advisers Act of 1940, as amended (the “Advisers Act”), and (ii) issued an interpretation and related guidance (the “Interpretation”) regarding the applicability of the federal proxy rules under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), to proxy voting advice provided by proxy advisory firms. The Guidance discusses, among other things, the ability of investment advisers to establish a variety of different voting arrangements with their clients and matters they should consider when they utilize the services of a proxy advisory firm. Specifically, the Guidance clarifies how an investment adviser’s fiduciary duties to its clients and Rule 206(4)-6 of the Advisers Act relate to an investment adviser’s voting authority on behalf of clients, particularly where the investment adviser retains a proxy advisory firm. The Interpretation confirms the SEC’s historical position that proxy voting advice generally constitutes a “solicitation” under Rule 14a-1(l) of the Exchange Act and, as such, falls under the purview of the antifraud provisions of Rule 14a-9 of the Exchange Act. The Guidance and Interpretation will become effective upon publication in the Federal Register. The Guidance and Interpretation were issued after years of advocacy by members of Congress, corporations and others claiming that proxy advisory firms such as Institutional Shareholder Services and Glass Lewis & Co. wield too much power and a regulatory framework should be put in place to address issues related to the services provided by these firms such as conflicts of interest, accuracy of reports, transparency and oversight.

On June 27, 2019, the Delaware Chancery Court entered an injunction requiring the boards of trustees of two closed-end investment funds (the “Funds”) to count the votes in favor of director candidates nominated by shareholder Saba Capital at the annual meetings scheduled for July 8, 2019.  Saba Capital had timely given notice of its nominations in compliance with the Funds’ advance notification bylaws.  In a response weeks later, the Funds asked that the nominees complete a supplemental questionnaire, which had “nearly one hundred questions over forty-seven pages, and was due in five business days.”  The Funds declared the nominations invalid after Saba Capital missed the five-day deadline for submitting the questionnaires.  In the case captioned Saba Capital Master Fund, Ltd. v. BlackRock Credit Allocation Income Trust, et al., Vice Chancellor Zurn granted Saba Capital’s request for injunctive relief, finding that the Funds’ rejection of the nominations submitted by Saba Capital violated the Funds’ bylaws. As discussed in this Client Alert, the Court’s ruling is consistent with views recently expressed by Olshan that overzealous defense advisors continue to “cross the line” by using onerous, overbroad questionnaires as traps to thwart shareholder nominations and chill activist campaigns. 

On November 16, 2017, Institutional Shareholder Services released updates for its Global Benchmark Proxy Voting Guidelines that will take effect for shareholders meetings held on or after February 1, 2018.

Institutional Shareholder Services ("ISS") recently released updates for its Global Benchmark Proxy Voting Guidelines that take into account the results of ISS’ Global Policy Survey, which we covered in our previous blog post on September 26, 2017, as well as its examination of relevant research, studies and commentary and various policy roundtables and group discussions held by ISS. This post focuses on ISS’ main updates to its policies for the United States relating to its recommendations on director elections and shareholder proposals.

On September 25, 2017, Institutional Shareholder Services (“ISS”) issued the results of its survey for its 2017-2018 policy cycle. The survey, which is an important part of ISS’ yearly global benchmark policy formation process, covers five “select high-profile governance” topics, three of which we believe are particularly relevant to shareholder activism and are summarized in this blog post.

On October 26, 2016, the Commissioners of the Securities and Exchange Commission voted 2-1 to propose to require universal proxy ballots in contested elections. Proponents of universal proxies believe that the current federal proxy regime makes it too difficult for shareholders to mix and match their votes among all candidates, thereby disenfranchising shareholders and undermining corporate governance in the United States.  Universal proxies would include all management and dissident nominees on one proxy card from which shareholders would vote.  Under the current rules and proxy voting mechanics, a shareholder who desires to split votes generally must attend the shareholders meeting and vote by ballot.