The Securities and Exchange Commission on July 26, adopted a final version of its proposed amendments to its proxy rules that now require public companies as well as any other persons soliciting shareholder votes to provide proxy materials to shareholders over the Internet (the "e-proxy rules").

The e-proxy rules now in place (with the new amendments) require an issuer to select between two options to provide proxy materials to shareholders, giving companies an alternative to the originally proposed "Notice Only" option. Under the "Full Set Delivery" option, a company would still be allowed to send a full set of paper proxy material to all shareholders, similar to the process followed today, as long as a company complies with "notice and access" by:

1. Posting proxy material on the Internet and notifying shareholders where to access it
2. Incorporating all the information required in the “Notice of Internet Availability of Proxy Materials” into the Proxy Statement and Proxy Card, or separate Notice

Effective Dates

The voluntary rules allowed companies to begin e-proxy solicitations, if they chose to, on July 1, 2007.  The adopted amendments to those rules now require all large accelerated filers (except mutual funds) to comply with the e-proxy rules beginning January 1, 2008.  All other companies and other soliciting persons (including mutual funds) must comply beginning January 1, 2009. 

Differences between the “Notice Only” and the “Full Set Delivery with Notice” Options of Proxy Delivery

While the two are similar in many respects (both require meeting the “notice and access” method for Internet delivery of proxy materials), there are important differences to note.
 
1. Notice Only

If an issuer chooses the Notice Only option, it must send a written Notice to all shareholders, at least 40 calendar days before the issuer’s annual shareholder meeting, stating the issuer’s proxy material has been posted on an Internet website. The website must be publicly accessible on or before the date the Notice is sent to shareholders, and the material must remain accessible until after the annual meeting.

Among the items the Notice must contain are:

• Location of the website
• Time, date, and location of the annual shareholder meeting
• Description of the items up for vote at the meeting
• Instructions on how to access the proxy voting card from the website
• Information on how the shareholder can request email or paper copies of the proxy material (Companies must provide paper or e-mail copies within three business days of a shareholder request; and once a shareholder makes a request for paper or e-mail copies, that request remains in effect until the shareholder requests a change.)

The Notice cannot be sent with a proxy voting card or any other material. The only exception is, the issuer may send a pre-addressed, postage-paid reply card so shareholders can request paper or e-mail copies of the proxy material.  A proxy card can only be sent 10 calendar days or more after the Notice was sent.
 
2. Full Set Delivery with Notice

The Full Set Delivery with Notice option allows an issuer to send a shareholder a complete set of proxy material on paper along with the Notice described above. Under this option, an issuer can follow the traditional procedures for delivery of paper proxy materials to shareholders that it has followed in the past. However, the issuer must also include a Notice, as described above, stating that the issuer’s proxy material is posted on an Internet website. The website must be publicly accessible on or before the date the proxy material with the Notice is sent to shareholders, and the material must remain accessible until after the annual meeting.

Under the Full Set Delivery with Notice option, issuers must send all required proxy materials with the Notice — it cannot send just some of the material.  Among the items the Notice must contain are:

• Location of the website
• Time, date, and location of the annual shareholder meeting
• Description of the items up for vote at the meeting

There are several important differences to note if the issuer chooses the Full Set Deliver with Notice option. These include:

• The issuer does not have to include a separate Notice with the proxy materials — incorporating the Notice information into the proxy materials is acceptable
• The issuer does not need to send the full set of proxy material 40 days before the annual meeting, as required with the Notice Only option, but can instead follow its traditional deadlines for sending out paper proxy materials
• The issuer does not have to provide paper or email copies to shareholders that request them, nor provide instructions on how to request them, because a full set of proxy material is included
• Although a proxy card will be included with the full set of proxy materials, an issuer is permitted to send a reminder proxy card, in accordance with previous procedures

Key Items to Remember

The most important things to remember about the two options are: 

• In both options, an issuer is required to post its proxy material on a website and send a notice to shareholders informing them of the website;
• In the Notice Only option, the issuer cannot send any other proxy material with the Notice; conversely, an issuer choosing the Full Set Delivery with Notice option must include all proxy material with the Notice
• Only the Notice Only option requires an issuer to send the Notice 40 days in advance of the annual meeting
• Only the Notice Only option requires an issuer to provide information to shareholders about how to request paper or email delivery of all proxy materials — and issuers must respond to these requests within three days of receiving them

Brokers, banks and those managing accounts for others will be responsible for notifying all beneficial owners. Other persons or groups wishing to use the Internet for shareholder solicitations must follow the same "notice and access" requirements, though they are allowed to limit solicitations to include just those shareholders who have not requested paper or e-mail copies.

How RR Donnelley Can Help You

RR Donnelley has created a low cost solution for issuers who want to take advantage of the notice and access model (Notice Only and Full Set Delivery models). EZProxy is a custom-branded web site where issuers can present proxy documents, proposals for review and voting instructions. The product facilitates shareholder preference requests for paper and electronic copies and provide links to vote. RR Donnelley creates an issuer’s EZProxy web page on-demand, without the involvement of any issuer IT resources.