The SEC’s Division of Corporation Finance just announced that it will largely step back from the shareholder proposal no-action letter process for the current proxy season (October 1, 2025 – September 30, 2026). The Division cited three reasons: resource constraints following the recent government shutdown, a high volume of registration statements competing for staff attention, and the extensive existing body of guidance already available to companies and proponents. The announcement aligns with the deregulatory approach we flagged in September when discussing potential reforms to the shareholder proposal process under the current SEC.

What’s Changing

Starting now and continuing through at least September 30, 2026, the Division will stop responding to no-action requests for nearly all exclusion bases under Rule 14a-8. The staff will only fully review and respond to requests involving Rule 14a-8(i)(1)—the provision addressing whether a proposal is a proper subject for shareholder action under state law. The Division explained that recent developments in this area have not yet generated enough guidance for companies and proponents to proceed independently, pointing to the current open question as to whether certain non-binding (‘precatory’) proposals are the “proper subject” for shareholder action under state law. During an October speech, the SEC Chair signaled a possible outcome to this question for Delaware corporations, indicating “high confidence” the SEC staff would permit exclusion of precatory proposals for a company that obtains an opinion of counsel that the proposal is not a “proper subject” for shareholder action under Delaware law.

For every other basis of exclusion—ordinary business, substantial implementation, economic relevance, and other common exclusion grounds, including technical grounds—the staff “will not respond substantively.”

How to Proceed

Companies intending to exclude a proposal must still comply with Rule 14a-8(j), which requires companies to notify the Commission and proponents at least 80 days before filing their definitive proxy statement. The notice must continue to be submitted to the Division using the online Shareholder Proposal Form with a simultaneous copy of the notice and its attachments sent to the proponent by email and/or mail.

These notices should look somewhat similar to traditional no-action letter requests, as Rule 14a-8(j) still requires the notice to include a copy of the proposal and an explanation of why the company believes that it may exclude the proposal (which should, if possible, refer to the most recent applicable authority, such as prior Division letters issued under the rule). However, given that the Division will not provide the staff’s views regarding the intended exclusion of a proposal, and no substantive response from the staff is expected, these notices should not include the traditional request for staff views.

But What if You Really Need to Know?

The Division clarified that companies wanting some form of response to a notification that it intends to exclude a proposal can include as part of the notice an unqualified representation that “the company has a reasonable basis to exclude the proposal based on the rule’s provisions, prior guidance, and court decisions.” Upon receipt of a notice containing that unqualified representation, the Division would issue a letter confirming it will not object to the omission based solely on that representation. The Division clarified it will not evaluate the adequacy of the representation or express a view on the basis or bases the company intends to rely on in excluding the proposal when issuing such a letter.

And if You Already Submitted, It Is Not Too Late!

For companies that have already submitted a no-action request to which the Division has not yet responded, the announcement applies retroactively. Companies that submitted a request on any basis other than Rule 14a-8(i)(1) and want a response from the Division should submit a supplemental notice with the representation described above. In those cases, the time of the initial submission will apply for purposes of the 80-day notice requirement.

Looking Ahead

While not formal rulemaking, this operational change shrinks the SEC’s role in the shareholder proposal process and pushes decision-making back to companies and potentially state courts. Companies should rely on careful legal analysis, existing SEC guidance, Staff Legal Bulletins, and case law to determine if they have a reasonable basis for omitting shareholder proposals submitted via Rule 14a-8. In making these determinations, companies are reminded that prior staff positions are non-binding and highly fact-specific, so prior staff concurrence or non-concurrence on similar proposals does not preclude a company from reaching a different conclusion. Additionally, there continues to be limited no-action letter history interpreting Staff Legal Bulletin 14M, which may warrant more careful analysis when assessing the reasonable basis for ordinary business and economic relevance exclusions.

That said, proceeding without staff concurrence is not without risk. Proponents that believe a proposal was improperly excluded may be more likely to challenge the exclusion in court. Companies also risk public backlash from proponents of proposals that are excluded and possible pushback from proxy advisors such as ISS and Glass Lewis. Without the Division weighing in, companies bear the full burden of defending their exclusion decisions against these potential challenges.

Whether this represents a temporary resource-driven adjustment or previews the permanent “modernization” of Rule 14a-8 on the SEC’s regulatory agenda remains unclear. Either way, companies will be proceeding with an added layer of uncertainty with respect to shareholder proposal strategies for the current season.

With thanks to Bobby Bee, Public Company Practice Development Lawyer, for his invaluable contributions to this blog post.