On November 17, the SEC’s Division of Corporation Finance announced a major shift in how the SEC Staff handles requests to exclude shareholder proposals. This welcome change eliminates a significant source of friction for public companies in establishing whether proposals under Exchange Act Rule 14a-8, the SEC’s shareholder proposal rule, may be excluded from companies’ proxy statements during the 2025-2026 proxy season.

In particular, for the upcoming proxy season, companies need not request Staff no-action relief before excluding a shareholder proposal from an annual meeting proxy statement, except for instances where a company seeks to exclude a proposal as improper under state law. Instead, companies need only notify the Staff at least 80 days before filing their definitive proxy materials that they will exclude a proposal. If the notice includes the company’s unqualified statement that the company has a reasonable basis under Rule 14a-8 to omit the proposal, the Staff will confirm that it will not object to the exclusion in reliance on the company’s representation. Except for proposals that a company claims are improper under state law, the Staff will not entertain traditional no-action requests to exclude shareholder proposals.

Here’s what you need to know about the Staff’s approach for this proxy season:

• Background and prior Staff practice. Exchange Act Rule 14a-8 governs when a company must include a shareholder’s proposal in the company’s proxy statement for its annual meeting. Historically, the Staff has expected companies to obtain no-action relief before excluding a proposal under Rule 14a-8, even though the rule itself does not require no-action relief as a condition of exclusion.
• New procedure for all proposal exclusions except exclusion as improper under state law. For the upcoming proxy season, when a company intends to exclude any proposal other than a proposal that is improper under state law:
  • the company must notify the Commission and the proponent that the company intends to exclude the proposal, as required under Rule 14a-8(j), by:
    • delivering the notice to the Commission and the proponent no later than 80 days before the company intends to file its definitive proxy statement; and 
    • explaining in the notice why the company believes it may exclude the proposal.
  • A company following this procedure will not receive a response from the Staff, but may then exclude the proposal from its proxy statement.
  • A company seeking a response from the Staff must include an unqualified representation that the company has a reasonable basis to exclude the proposal based on Rule 14a-8, prior Staff guidance, and/or judicial decisions.
• Exclusion of proposals that are improper under state law still follow prior approach. A company seeking to exclude a proposal as improper under state law pursuant to Rule 14a-8(i)(1) must still follow the traditional no-action process.
• Prior Staff approach is not binding. A company need not feel bound by prior adverse decisions by the Staff if the company believes it has a reasonable basis for exclusion.
  • The lack of a prior Staff response allowing for exclusion of a particular proposal does not prevent a company from concluding that there is a reasonable basis for exclusion.
  • A prior Staff response stating that it was unable to concur with a company’s basis for exclusion also does not prevent a company from concluding that there is a reasonable basis for exclusion.
• Some practical tips about implementing the new approach.
  • Rule 14a-8(j) notices will resemble much-abbreviated versions of prior no-action letters, with some changes to the introduction.
  • Companies must still state their basis and reasons for exclusion because Rule 14a-8(j) requires a company to include an explanation of why the company believes that it may exclude the proposal in its notice, but we expect that notices under Rule 14a-8(j) will be considerably shorter than traditional no-action letters.
  • We anticipate that practice will be mixed as to whether to request a response to a Rule 14a-8(j) notice. Some companies may conclude that the extra work involved (e.g., to substantiate the unqualified representation of reasonableness) is worth the potential comfort of receiving an automatic response given solely in reliance on that representation.
  • We believe that the greater flexibility accorded to companies this proxy season will promote a beneficial realignment of Rule 14a-8 practice and that responsible use of the Staff guidance will give companies a newfound ability to rely on the rule as written.