SEC Upends No-Action Letter Review Process for 2026 Proxy Season
In Short
The Situation: On November 17, 2025, the U.S. Securities and Exchange Commission ("SEC") announced that it will no longer be responding substantively to Rule 14a-8 no-action requests, unless the request relates to whether a proposal is proper under state law—a rarely used exclusionary basis for which SEC Chairman Atkins has recently expressed support.
The Result: Companies that intend to exclude shareholder proposals from their proxy statements will have to navigate unchartered territory this upcoming proxy season, as historically companies have typically excluded shareholder proposals only if the SEC granted no-action relief after substantive review or, in rare instances, received binding decisions from a court.
Looking Ahead: Without substantive review from the SEC, companies will face a more difficult set of decision points and will need to carefully weigh the strength of their positions under Rule 14a-8 against litigation options and risks, as well as guidance from proxy advisors and institutional investors.
Citing resource and timing constraints following the lengthy federal government shutdown, as well as the extensive body of SEC guidance on the proper application of Rule 14a-8, the SEC announced that it will not respond to no-action requests for, and express no views on, companies' intended reliance on any basis for exclusion of shareholder proposals under Rule 14a-8, other than no-action requests to exclude a proposal under Rule 14a-8(i)(1), as discussed below.
Pursuant to Rule 14a-8(j), companies are still required to notify the SEC and the proponent if they exclude a shareholder proposal from the proxy statement. This notification must be made no later than 80 calendar days before companies file their definitive proxy statement.
While the SEC made it very clear that it will not respond "substantively" to notifications, it did acknowledge that companies may seek a formal response from the SEC to confirm that the SEC will not object if companies omit the proposal from their proxy materials. Accordingly, the SEC will confirm in writing that it will not object to the exclusion of a proposal if companies or their counsel provide an "unqualified representation" that companies have a "reasonable basis" to exclude the proposal under Rule 14a-8. Per the SEC, companies may rely on "provisions of Rule 14a-8, prior published guidance and/or judicial decisions," although it also stated that absence of applicable precedential guidance "does not mean that companies cannot form a reasonable basis to exclude the proposal."
Notably, the SEC stated that it will continue to review and express its views on no-action requests related to precatory proposals under Rule 14a-8(i)(1) until such time as the SEC believes there is sufficient guidance available to assist companies and proponents in their decision-making process. Rule 14a-8(i)(1) is a rarely used exclusionary basis that was recently spotlighted by Chairman Atkins when he posited that precatory proposals may not be a "proper subject" for shareholder action under Delaware law. See our White Paper, Preparing for an Evolving Shareholder Proposal Landscape, for additional insight on Chairman Atkins's remarks.
The SEC's new modus operandi applies to the current proxy season (October 1, 2025, to September 30, 2026) and includes no-action requests received before October 1, 2025, to which the SEC has not yet responded.
We have already seen one example of a company submitting the notice contemplated by the SEC and making the unqualified representation in the context of a procedural deficiency. We expect interested companies to monitor these filing trends as they evaluate their own specific shareholder proposals in the light of the considerations and risks noted in this piece.
Potential Implication: Heightened Litigation Risk
For the 2026 proxy season, companies will be unable to rely on the safety blanket of substantive no-action relief from the SEC, heightening the risk of pushback from institutional investors, scrutiny from proxy advisors, and litigation from proponents.
Litigation relating to Rule 14a-8 has been rare to date with a little over 30 lawsuits since the 1960s, and approximately two-thirds of that litigation was brought by proponents seeking injunctive relief to force companies to include the proposal on the proxy statement. Companies have also initiated litigation in rare instances, such as ExxonMobil's lawsuit to obtain declaratory relief from a federal court as to the proper application of Rule 14a-8. Jones Day represented ExxonMobil in this matter.
Companies seeking to exclude shareholder proposals should carefully weigh these risks against, among other things: (i) the subject matter of the proposal; (ii) the strength of the companies' arguments under Rule 14a-8; (iii) the identity of the proponent and the proponent's anticipated appetite for bringing or defending litigation; (iv) potential delays with the timing of its annual meeting and filing of its definitive proxy materials (among other matters) if litigation ensues; and (v) potential negative reaction from shareholders and proxy advisors.
Two Key Takeaways
- Companies that are considering excluding a shareholder proposal should diligently follow Rule 14a-8's mandated procedures; conduct and record the board's process and deliberation regarding a company's decision to exclude a proposal; and engage, and possibly negotiate, with the proponent.
- Those companies should also anticipate risks beyond litigation, such as negative press and criticism from proxy advisors and shareholders; and consider the optics and precedent that may be set for treatment of future proposals.
