Furnishing Proxy Statements To All Shareholders

With the adoption of universal proxy under which a dissident shareholder will be required to solicit at least 67% of the company’s shareholders coupled with the fees Broadridge/Mediant charge companies to mail proxy materials to street name holders, the question often arises as to whether public companies are required to furnish proxy statements to all shareholders. The technical answer is no, but the practical answer is yes.

Under the federal proxy rules, companies are not required to solicit or furnish a proxy statement to a certain number or percentage of shareholders. Rather, a company is only required to furnish a proxy statement to each person solicited. However, because Rule 14c-2 of the Exchange Act requires companies to provide all shareholders not solicited in connection with a shareholder meeting an information statement with the same information required in a proxy statement, companies routinely satisfy their obligation under Rule 14c-2 by furnishing a proxy statement to all shareholders. In this regard, it would be more expensive for a company to prepare and furnish an information statement to shareholders that did not receive a proxy statement than it is to simply furnish to them the proxy statement.

A company that fails to furnish a proxy statement or information statement to all shareholders in connection with a shareholder meeting would violate Section 14(c) of the Exchange Act and Rule 14c-2 thereunder. This violation could theoretically result in an SEC enforcement action or private plaintiff litigation.

See SEC Release No. 34–79164 at page 79138.