SEC To Defer To Companies Excluding Most Rule 14a-8 Shareholder Proposals This Proxy Season

The Securities and Exchange Commission (the "SEC") has announced that, for the 2025–2026 proxy season, it will not provide substantive responses to company no-action requests to exclude shareholder proposals under Rule 14a-8, subject to certain exceptions. According to the SEC, the revised approach is effective through September 30, 2026, and reflects both resource constraints and the extensive guidance already available to companies and proponents. Companies that intend to exclude any shareholder proposal must still comply with Rule 14a-8(j) and notify both the SEC and the shareholder proponent no later than 80 calendar days before filing a definitive proxy statement, and such notices will be made public on EDGAR.

Although the SEC will not evaluate the merits of most no-action requests to exclude a shareholder proposal, it will provide a limited, "no objection" response stating that it has no objection to exclusion of a proposal where the company provides an unqualified representation that it has a reasonable basis for exclusion under Rule 14a-8, prior SEC guidance or judicial decisions. We understand that by requiring an "unqualified" representation, the SEC intends that the representation must not be accompanied by meaningful assumptions. The SEC's "no objection" response will be based solely on the company's representation, and the SEC will not assess the adequacy of the company's reasoning for exclusion. As a result, companies will bear increased responsibility to ensure that any exclusion determination is well-supported.

The principal exception to the new policy concerns Rule 14a-8(i)(1), which addresses proposals that are improper under state law. Historically, the SEC has taken the position that nonbinding proposals generally are proper subjects for shareholder consideration under state law. However, SEC Chairman Paul Atkins recently gave a speech contesting the idea that precatory proposals are proper under Delaware law and stated that "if there is no fundamental right under Delaware law for a company's shareholders to vote on precatory proposals—and the company has not created that right through its governing documents—then one could make an argument that a precatory shareholder proposal submitted to a Delaware company is excludable under [Rule 14a-8(i)(1)]." Given this recent development and the lack of sufficient applicable guidance, the SEC will continue to consider no-action requests based on Rule 14a-8(i)(1). Further, we understand that if a company submits a no-action request based on Rule 14a-8(i)(1) and another subsection of Rule 14a-8, the SEC will only respond to the portion of the request based on Rule 14a-8(i)(1).

Practical Implications for Companies

The SEC's withdrawal from its traditional role as arbiter places companies in a more risk-sensitive position with respect to the Rule 14a-8 process. Without substantive SEC review, companies excluding shareholder proposals will have heightened litigation risk, increased scrutiny from shareholder proponents, and potential negative reactions from proxy advisory firms. It remains to be seen how market practice will evolve in this environment, particularly with respect to Rule 14a-8(j) notifications. Some companies may seek to mitigate risk by submitting Rule 14a-8(j) notices that are as detailed as prior no-action requests, including extensive discussion of their reasons for excluding a proposal. Other companies may choose to reduce the historically significant administrative burden of no-action requests and submit streamlined Rule 14a-8(j) notices that are limited to the express requirements of that Rule. Companies that elect not to provide extensive reasoning in Rule 14a-8(j) notices should develop robust internal analyses for exclusion grounded in SEC rules, guidance and case law, and should document distinctions from prior SEC no-action responses. Given the potential for an increase in shareholder litigation and the risk of adverse proxy advisor recommendations, many companies may remain reluctant to exclude proposals absent clear procedural grounds.

Additionally, because there is no traditional no-action process that allows proponents to respond to a company's request to exclude their proposal, companies cannot assume that a shareholder will withdraw its proposal simply because the company notifies them of its intent to omit it from the definitive proxy materials. Consequently, a proponent may still attempt to present the proposal at the annual meeting. To preserve discretionary authority to vote proxies against such a proposal, companies should consider relying on Exchange Act Rule 14a-4(c)(2) by describing the proposal in the proxy statement and stating that the company intends to use its discretion to vote against it.

As a key takeaway, it remains unclear whether the SEC's updated process will simplify shareholder proposal exclusions or whether it will actually produce a more complex and litigious Rule 14a-8 environment.

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