The proxy solicitation is one of the central tools for democratic decision-making in a publicly-held corporation. All shareholders have access to the process if they can meet certain requirements. Consequently, activist investors may turn to proxy solicitations to make changes in companies.

At the same time, many sorts of relatively benign corporate decisions also go through the proxy solicitation process. Companies use it to nominate and elect board members, conduct acquisitions and mergers with shareholder approval, make changes to structures and governance, and approve many other year-to-year activities.

In the world of securities law, it's important to understand the proxy solicitation process. Investors and corporate officers should understand these four things.

When Is a Solicitation Possible?

Approved solicitations go up for votes at the next shareholders' meeting. Every publicly-held company must hold a meeting once a year.

How Do Solicitations Work?

Every company has its by-laws. An activist shareholder wanting to make changes should contact a securities attorney so they can have counsel during the process. Lawyers can help shareholders determine the thresholds for approval of solicitations. They can also help clients with the wordings. If the company resists a solicitation request that complies with the by-laws, a securities attorney may also help the shareholder sue.

On the corporate side of the ledger, the board usually has the share vote threshold needed to approve solicitations. Unsurprisingly, board members tend to approve solicitations for their re-election and the appointment of their preferred officers.


Notably, the wording of a solicitation is a big deal. Businesses usually ask a corporate attorney to review all solicitations from the company. Particularly, they don't want solicitations to be too coercive. The goal is to state what the vote is about. Also, the board can include a note on the voting form stating how they believe shareholders should vote.

SEC Finalization

Corporate by-laws determine which issues are approved for voting. However, the SEC finalizes all solicitations involving issues besides the election of directors and board members or the appointment of auditors. After 10 days without SEC comment, the company can issue the solicitation. The company can then send mail and email forms explaining the solicitations for the current meeting so shareholders have time to learn about the issues and decide how to vote.

Bear in mind you will have to file forms and pay fees for seeking solicitation approval. These are non-refundable regardless of the outcomes of the approval process and any potential vote.

To learn more about coperate law, reach out to a law firm, such as Carter and West Law Firm.