Also known as: proxy statement · proxy stmt · proxy · proxies
Written by attorneys — see sources below.
A disclosure document that a corporation must furnish to shareholders when soliciting their proxies to vote at a shareholders meeting. The document supplies information about the matters to be voted on so that shareholders can make informed decisions whether to grant a proxy and how to direct the proxy holder to vote.
Paragon Construction mails its annual proxy statement before the meeting to elect directors. Paul Peterson reviews the disclosures, then signs an appointment form authorizing Patricia Patel to vote his shares. The inspector of elections receives the form before the meeting and counts Patel's vote as Peterson's.
Preston Pratt reviews a corporate proxy statement for an upcoming merger vote while deployed overseas. He sends a signed writing authorizing Pedro Pacheco to stand in as proxy at the shareholders meeting. The corporation accepts the proxy appointment and counts the vote.
Prosperity Investments owns five percent of Pioneer Energy and nominates two directors. Pioneer Energy's bylaws require inclusion of shareholder nominees. The corporation places the nominees on the proxy statement and form of proxy sent to all shareholders before the annual meeting.
Progressive Healthcare's bylaws require the company to reimburse reasonable expenses a shareholder incurs when soliciting proxies for director elections. After a successful contest, the board approves payment of the shareholder's printing and mailing costs incurred before the record date.
TSC Industries issues a proxy statement recommending a merger with National Industries. The statement omits that National already owns thirty-four percent of TSC and that TSC's founder sold his shares to National. Minority shareholders challenge the omission as material.
In February 1969 National Industries, Inc. acquired 34% of TSC Industries, Inc.'s voting securities from Charles E. Schmidt and his family. Schmidt, TSC's founder and principal shareholder, resigned from the board along with his son. Five National nominees then joined TSC's board. Stanley R. Yarmuth, National's president and chief executive officer, became chairman of the TSC board. Charles F. Simonelli, National's executive vice president, became chairman of the TSC executive committee. On October 16, 1969, the TSC board, with the National nominees abstaining, approved a proposal to liquidate and sell all of TSC's assets to National in exchange for National Series B preferred stock and warrants. On November 12, 1969, TSC and National issued a joint proxy statement to their shareholders recommending approval of the proposal. The proxy solicitation succeeded. TSC entered liquidation and dissolution, and the share exchange was completed. Northway, Inc., a TSC shareholder, filed suit on December 4, 1969, in the United States District Court for the Northern District of Illinois against TSC and National. The complaint alleged that the joint proxy statement violated section 14(a) of the Securities Exchange Act of 1934 and Rules 14a-3 and 14a-9. It claimed the statement failed to disclose that the Schmidt interests transfer had given National control of TSC. It also claimed the statement omitted material facts concerning the degree of National's control over TSC and the favorability of the transaction terms to TSC shareholders. The District Court denied Northway's motion for summary judgment on liability. The Court of Appeals for the Seventh Circuit affirmed that a genuine issue of fact existed regarding whether National had acquired control through the Schmidt purchase. This precluded summary judgment on the Rule 14a-3 claim. But the court reversed on the Rule 14a-9 claims and ordered partial summary judgment for Northway. It held that certain omissions were material as a matter of law. The Supreme Court granted certiorari to address the standard of materiality applied by the Court of Appeals.
J. I. Case Co. solicits proxies for a merger without disclosing that management manipulated the market price of the target stock. A shareholder who granted a proxy and later discovered the manipulation brings a private suit alleging violation of the proxy rules.
Respondent owned 2,000 shares of common stock of J. I. Case Company acquired prior to the merger. He brought a civil action based on diversity jurisdiction. Respondent sought to enjoin a proposed merger between Case and the American Tractor Corporation on grounds including breach of the fiduciary duties of the Case directors, self-dealing among the management of Case and ATC, and misrepresentations contained in the material circulated to obtain proxies. The complaint was in two counts. The first count was based on diversity and claimed a breach of the directors' fiduciary duty to the stockholders. The second count alleged a violation of § 14(a) of the Securities Exchange Act of 1934 with reference to the proxy solicitation material. The injunction was denied and the merger was consummated. Successive amended complaints were filed. The case was heard on the two-count complaint. The allegations included that petitioners solicited proxies for a special stockholders’ meeting at which the merger was to be voted upon. The proxy solicitation material was false and misleading in violation of § 14(a) and Rule 14a-9. The merger was approved by a small margin of votes and would not have been approved but for the false and misleading statements. Case stockholders were damaged thereby. The District Court held that as to the federal count it had no power to redress the alleged violations of the Act but was limited solely to the granting of declaratory relief thereon under § 27 of the Act. The court held the Wisconsin security for expenses statute applicable to both counts except the declaratory portion of Count 2. It ordered respondent to furnish a bond in the amount of $75,000. Upon his failure to do so, the court dismissed the complaint save that part of Count 2 seeking a declaratory judgment. On interlocutory appeal the Court of Appeals reversed on both counts. It held that the District Court had the power to grant remedial relief and that the Wisconsin statute was not applicable. The Supreme Court granted certiorari limited to the question of whether § 27 of the Act authorizes a federal cause of action for rescission or damages to a corporate stockholder with respect to a consummated merger authorized pursuant to a proxy statement alleged to contain false and misleading statements violative of § 14(a) of the Act.
A corporation must furnish a proxy statement whenever it solicits proxies for a shareholders meeting at which directors will be elected or other matters requiring shareholder approval will be voted upon. The statement supplies the information shareholders need to decide whether to grant a proxy and how to direct the vote.
…v. United States, 406 U. S., at 153-154. Similarly, we did not require proof that material omissions or misstatements in a proxy statement decisively affected voting, because the proxy solicitation itself, rather than the defect in the solicitation materials, served as an essential link in the transaction. See Mills v.…
…provides: “False or misleading statements. No solicitation subject to §§ 240.14a-1 to 240.14a-10 shall be made by means of any proxy statement, form of
…Redish, The Value of Free Speech, 130 U. Pa. L. Rev. 591, 594 (1982). Corporate speech, however, is derivative speech, speech by proxy. A regulation such as BCRA §203 may affect the way in which individuals disseminate certain messages through the corporate form, but it does not prevent anyone from speaking in his or her…
…regulation shall be made unless each person solicited is concurrently furnished or has previously been furnished with a written proxy statement containing the information specified in Schedule 14A.” Schedule 14A, Item 5 (e), requires: “If to the knowledge of the persons on whose behalf the solicitation is made a change in control…
When a corporation solicits proxies for director elections, its bylaws may require the proxy statement and form of proxy to include one or more individuals nominated by shareholders in addition to the board's nominees. The corporation must follow the procedures and conditions set out in the bylaws.
Yes. A corporation's bylaws may require reimbursement of reasonable expenses a shareholder incurs when soliciting proxies or consents in a director election. The reimbursement obligation is subject to any procedures and conditions stated in the bylaws and does not apply to elections with a record date before the bylaw's adoption.
An omitted fact is material if there is a substantial likelihood that a reasonable shareholder would consider it important in deciding how to vote. The test focuses on whether the disclosure of the omitted fact would have significantly altered the total mix of information made available to shareholders.
Yes. A shareholder who grants a proxy in reliance on a materially false or misleading proxy statement may bring a private action for damages or injunctive relief. Private enforcement supplements Commission action and serves as an effective means of ensuring compliance with the proxy requirements.