KMK Law Corporate & Securities Blog

On September 29, 2021, the Securities and Exchange Commission released a notice filed by the New York Stock Exchange (“NYSE”) of a proposed rule change. The NYSE seeks approval of a proposed amendment to the shareholder voting requirement set forth in Section 312.07 of the NYSE Listed Company Manual (the “Manual”).

Currently, Section 312.07 provides that, where shareholder approval is required for the listing of any new or additional securities, or where any matter requires shareholder approval, including for stock issuances pursuant to an equity compensation plan, the minimum vote required is a majority of “votes cast”. The Manual does not specifically address the treatment of abstentions, however the NYSE has historically taken the position that abstentions should be treated as “votes cast” for purposes of Section 312.07. A proposal is deemed approved under this approach if the votes in favor exceed the aggregate of the votes cast against the proposal plus abstentions. This approach has led to some confusion as the corporate laws of many states, including Delaware, permit companies to elect in their governing documents that “votes cast” do not include abstentions.    

The NYSE proposal would amend Section 312.07 to provide that an issuer should determine whether a proposal has received a sufficient number of votes cast in accordance with its own governing documents and applicable state law. This approach is consistent with how NASDAQ treats abstentions.

The NYSE proposal can be found here. The SEC is seeking public comment on the proposed rule change within 21 days after publication in the Federal Register. The SEC generally must approve or disapprove the proposed rule change within 45 days of publication. In the meantime, NYSE-listed companies may wish to review their governing documents in light of this anticipated rule change.