Key Takeaways
- On Nov. 17, 2025, the U.S. Securities and Exchange Commission (SEC) announced that it will pause substantive review of no-action letter requests regarding Rule 14a-8.
- Companies must continue to provide notice of exclusion of shareholder proposals to the SEC and proponents under Rule 14a-8(j).
- Companies seeking a response from the SEC may include with their Rule 14a-8(j) notice an unqualified representation and explanation that the exclusion has a reasonable basis, to which the SEC will respond with a no-objection letter.
- The SEC will continue to substantively review no-action letters regarding Rule 14a-8(i)(1), which concerns exclusion of a 14a-8 shareholder proposal if it is not a “proper subject” for action under state laws.
- Whether nonbinding shareholding proposals, also referred to as “precatory proposals,” are a “proper subject” under Delaware law has come under scrutiny. SEC Chairman Paul Atkins has recently indicated that the SEC staff, in responding to a no-action request on this basis, would likely defer to an opinion from counsel that the proposal was not a proper subject for shareholder action under state law in granting any such requests.
The SEC’s Division of Corporate Finance (the Division) announced on Nov. 17 that it is pausing substantive review of no-action requests concerning the exclusion of shareholder proposals under Rule 14a-8 of the Exchange Act of 1934, as amended. The SEC explained that due to the backlog of registration statements and other filings requiring staff attention following the government shutdown, as well as the body of guidance on Rule 14a-8 from the SEC available to both companies and proponents, it will not express views on companies’ intended reliance on Rule 14a-8 for exclusion of shareholder proposals (other than no-action requests pertaining to Rule 14a-8(i)(1), as discussed below). The pause applies both to the current proxy season, which the SEC has defined as Oct. 1, 2025, through Sept. 30, 2026, and to any no-action requests received before Oct. 1, 2025, to which the Division has not yet responded.
How do companies proceed during the pause?
First, a company intending to exclude shareholder proposals must still comply with Rule 14a-8(j), which requires companies to provide notice to the SEC and to proponents no later than 80 calendar days before filing a definitive proxy statement. Such requirement is exclusively informational, however, and does not require companies to seek the staff’s views on any planned proposal exclusions. Companies are to use the SEC’s online Shareholder Proposal form.
Second, the Division recognized that a company may wish to receive some response to its exclusion notification. As such, a company seeking a response to its notification that it intends to exclude a proposal from its proxy materials 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 a shareholder proposal based on (1) the provisions of Rule 14a-8, (2) prior published guidance and/or (3) judicial decisions. The Division will respond with a letter indicating that, based solely on the company’s representations, it will not object to a company omitting a shareholder proposal from its proxy materials. But again, the Division stated that it will not substantiate the adequacy of the company’s representations. It appears that the SEC will be posting company 14a-8(j) notices and the SEC’s responses on its website.
Whether or not a company decides to seek a response from the Division, it should carefully interpret (in consultation with its legal counsel) existing SEC guidance and case law. Responses to prior no-action requests and Rule 14a-8(j) notices are nonbinding, so a company may reasonably reach a different conclusion from that guidance, but it also is not insulated from an enforcement action or lawsuit by the proponent by relying on SEC guidance. Proponents can sue in federal court to force a company to include a shareholder proposal.
The pause does not apply to no-action letters regarding Rule 14a-8(i)(1).
The Division will continue to substantively review no-action letter requests regarding the application of state law and Rule 14a-8(i)(1), which allows exclusion of a 14a-8 shareholder proposal if it is not a “proper subject” for action under the laws of the jurisdiction in which the excluding company is incorporated.
Whether nonbinding shareholding proposals, also referred to as “precatory proposals,” are a proper subject under Delaware law has come under scrutiny recently. While the Delaware courts have not directly held on whether precatory proposals are proper, on Oct. 9, 2025, SEC Chairman Paul Atkins remarked that the SEC staff is amenable to supporting the exclusion of precatory proposals to Delaware companies via no-action letter responses. Given the limited available guidance for companies and proponents to rely on in this area and this development, the SEC determined it would continue to provide guidance in this area.
Chairman Atkins expressed the view that precatory proposals, which are nonbinding and typically focus on environmental and social issues that are not material to the company, consume a significant amount of time and impose costs on the company. He further stated that if, as some argue, shareholders do not have a fundamental right under Delaware (or other state) law to propose or vote on such proposals, a company could seek no-action relief, and if it is accompanied by a supporting legal opinion from counsel that the proposal was not a proper subject for shareholder action under state law, he had “high confidence that the SEC staff would honor that position.”
Eliminating precatory proposals under Delaware law would significantly pare back shareholder proposals under Rule 14a-8. It will be interesting to see how companies and proponents react to this development.
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