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Highlights
- The U.S. Securities and Exchange Commission's (SEC) shift away from reviewing most no-action requests reflects broader uncertainty around the future role of shareholder proposals and balance between shareholders and public companies.
- The policy change appears consistent with a wider administration effort to reassess shareholder rights, including scrutiny of proxy advisers and the shareholder proposal process under Rule 14a-8.
- An executive order issued in December 2025 directs the SEC to review and potentially revise or rescind existing rules and guidance governing shareholder proposals, with particular focus on diversity, equity and inclusion and environmental, social and governance-related matters.
In a November 17, 2025, statement (Statement), the U.S. Securities and Exchange Commission's (SEC) Division of Corporation Finance (Division) announced it would take a new approach to its review of shareholder proposals for the 2026 Proxy Season.1
The Division determined that it would no longer review and respond to no-action requests for companies that desire to exclude shareholder proposals submitted pursuant to Rule 14a-8 under the Securities Exchange Act of 1934, as amended, which provides 13 bases to exclude a proposal. Where the purported basis for exclusion is Rule 14a-8(i)(1), which permits exclusion because the proposal is contrary to state law, the Division has stated it will continue its standard practice.
This new policy applies to all shareholder proposal requests submitted on or after October 1, 2025, through September 30, 2026. The Division cited the 43-day government shutdown and influx of registration statements for this change, noting that registration statements and other filings require staff attention, which should not be diverted by proposal review. In effect, except as noted, the Division has withdrawn from its role as an arbiter of these matters, and companies now effectively bear responsibility for determining whether exclusion of a proposal is appropriate.
Under Rule 14a-8(j), companies desiring to exclude shareholder proposals from their proxy materials must notify the SEC and the proposal's proponent no later than 80 calendar days prior to the filing of the company's proxy statement of its intention to exclude the proposal and supporting reasoning permitting such exclusion. Under the prior approach, Rule 14a-8(j) notifications typically included a request for a no-action response from the SEC that would indicate the Division's non-objection to the exclusion of the proposal. If the Division declined to provide the no-action advice, the company would effectively be required to include the proposal in its annual meeting proxy materials or risk an SEC enforcement action. In rare instances, companies could seek further review from the courts.
Although the Division will no longer provide a substantive response to a no-action request other than one made pursuant to Rule 14a-8(i)(1), it has indicated a willingness to provide a "no-objection" response if, in its Rule 14a-8(j) notification, the company or its counsel provides an "unqualified representation that the company has a reasonable basis to exclude" the shareholder proposal based on prior published guidance or judicial decisions.2 As of the date of this Holland & Knight alert, approximately 84 companies have received no-objection letters following request in their Rule 14a-8(j) notifications to the Division.3 Approximately 33 Rule 14a-8(j) notices have been filed that have not requested a response from the Division, of which nine of the related proposals were later withdrawn by the proponent.4
The Division emphasized the extensive body of guidance on which companies may rely in determining whether to exclude a shareholder proposal, citing previous staff bulletins, no-action requests and case law. It encouraged companies to utilize and rely on these resources in determining whether to exclude the proposal; however, the Statement noted that companies need not necessarily regard themselves as being bound by such precedent, stating in footnote 3 to the Statement (Note 3) as follows:
Prior staff responses to Rule 14a-8 no-action requests are not binding and reflect only informal staff views. The absence of a prior staff response indicating that the staff agreed that there was some basis to exclude a particular type of proposal does not mean that companies cannot form a reasonable basis to exclude the proposal. Likewise, a prior staff response indicating that the staff was unable to concur with a company's view that a proposal may be excluded does not mean that companies cannot form a reasonable basis to exclude the same or a similar proposal.
The Division acknowledged that although robust guidance exists for most exclusionary bases, there is an insufficient body of guidance for Rule 14a-8(i)(1) due to recent developments in the application of state law and, therefore, the Division will continue providing views on no-action requests under this rule until the gap is sufficiently filled. This position is likely the result of SEC Chair Paul Atkins' concerns regarding the legitimacy of precatory proposals (nonbinding) under Delaware law, which he expressed during his keynote address at the John L. Weinberg Center for Corporate Governance's 25th Anniversary Gala in October 2025. At this same address, the chair also stated with respect to Rule 14a-8 that the Commission should "re-evaluate the rule's fundamental premise that shareholders should be able to force companies to solicit for their proposals."5
Initiated a few days after the Statement was issued, the University of Delaware Weinberg Center for Corporate Governance conducted a Shareholder Proposal Survey.6 The recently released results of the survey express a broad dissatisfaction among both shareholders and public companies with the SEC's administration of the pre-Statement shareholder proposal process.7 The survey reports that respondents were generally frustrated by the shareholder proposal system, citing the variability and volatility of responses across proxy seasons, which fosters diminished predictability in outcomes, as well as moderate perceptions of fairness.8
Implications for Shareholder Proposals in 2026
Not a Blank Check
The Division has largely removed itself as the primary arbiter of shareholder proposal exclusions and seemingly provides public companies broad discretion to exclude proposals if a "reasonable basis" can be articulated.9 Arguably, this is not a high bar and will be subject to broad interpretation. Companies and their counsel should, nevertheless, exercise care in establishing that exclusion of a proposal is not improper under the rules and relevant precedent. Rule 14a-8(j) notifications should include reasonably complete arguments supporting the decision to exclude, although the Division staff has indicated that it does not expect 14a-8(j) notifications under the policy to be as dense as they were under the prior policy. Note 3 suggests, however, that companies may not be overly restrained by SEC precedent, particularly where there were good arguments on both sides of the issue. It is worth noting that a shareholder who disagrees with exclusion will have some recourse, including through advocacy communication with the Division or, in a more extreme case, by seeking redress in the courts.
One potential check on a company's discretion to exclude a proposal may derive from proxy advisory firm Institutional Shareholder Services (ISS), which recently announced that a company excluding a shareholder proposal should, in certain instances, clearly explain why it believes exclusion is appropriate and, where there is SEC precedent to the contrary, why it believes that the precedent doesn't apply. ISS further noted:
In certain cases, failure to present a clear and compelling argument for the exclusion of a proposal could be viewed as a governance failure, leading to ISS highlighting the exclusion for our clients' information through direct reference in the report, contentious flag at the proposal level, or, in rare cases based on case-specific facts and circumstances, a recommendation to vote against one or more agenda items (which may be individual directors, certain committee members or the entire board).10 (emphasis added)
ISS' clear and compelling standard would appear to be a higher bar than that mandated by the Statement to receive a no-objection letter from the Division.
Litigation Risk
Although this shift in guidance theoretically simplifies the path for companies to exclude shareholder proposals from their proxies, it also creates uncertainty and potential litigation for companies that choose to do so. The SEC's previous no-action letters represented a measure of due process and nonbinding guidance to the effect that the SEC would not recommend enforcement, which served as a deterrent to shareholders' pursuit of a challenge in the courts. The approach also provided some comfort for companies that shareholder challenges would have limited, if any, success.
Although it is too early to tell, without the benefit of a no-action letter from the SEC, companies may face increased risk of litigation challenges from shareholders seeking the inclusion of proposals, which could complicate and even delay their annual meetings.
Future of Shareholder Proposals
Although the SEC policy change was assertedly effected as a response to the government shutdown and workforce constraints, it appears to reflect a greater movement by the administration to reconsider the relationship between shareholders and companies.
In this regard, President Donald Trump issued an executive order on December 11, 2025, raising concerns regarding the role played by proxy advisors and further directing the SEC chair, among other things, to review and to consider revising or rescinding all rules, regulations, guidance, bulletins and memoranda relating to shareholder proposals, including Rule 14a-8 – particularly those that "implicate diversity, equity and inclusion" and "environmental, social and governance policies."11
Holland & Knight will continue to monitor the shareholder proposal process landscape. If you would like more information, please contact the authors.
Footnotes
1. SEC Division of Corporate Finance, Statement Regarding the Division of Corporate Finance's Role in the Exchange Act Rule 14a-8 Process for the Current Proxy Season (Nov. 17, 2025).
2. The Division's Chief Counsel Michael Seaman stated that a company should seek this review where decisions for exclusion are "close to the line" and both proponents and companies would be able to make reasonable arguments for and against inclusion. He clarified that many companies could make a reasonable basis representation and that this language was intended to deter assumptions that underly reasonable basis arguments.
3. SEC, 2025-2026 Correspondence Under Exchange Act Rule 14a-8 (Jan. 20, 2026).
4. Id.
5. Paul Atkins, Keynote Address at the John L. Weinberg Center for Corporate Governance's 25th Anniversary Gala (Oct. 9, 2025).
6. Lawrence A. Cunningham, Shareholder Proposal Survey Report and Analysis of Results (2026).
7. Id. at 9.
8. Id. at 14.
9. See Statement, which notes: "Accordingly, if a company wishes to receive a response for any proposal that it intends to exclude pursuant to a basis other than Rule 14a-8(i)(1), the company or its counsel must include, as part of its notification pursuant to Rule 14a-8(j), an unqualified representation that the company has a reasonable basis to exclude the proposal based on the provisions of Rule 14a-8, prior published guidance, and/or judicial decisions. In those situations, the Division will respond with a letter indicating that, based solely on the company's or counsel's representation, the Division will not object if the company omits the proposal from its proxy materials." (emphasis added) (footnotes omitted)
10. ISS United States Procedures & Policies (Non-Compensation) Frequently Asked Questions, found at p. 34.
11. The White House, Protecting American Investors from Foreign-Owned and Politically-Motivated Proxy Advisors (December 11, 2025).
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