On February 23, 2016, the Department of Commerce, Community and Economic Development adopted changes to the state proxy regulations.[1] The proxy regulations apply only to corporations formed pursuant to the Alaska Native Claims Settlement Act.[2] State law requires ANCSA corporations having at least $1 million of assets and 500 or more shareholders to file their proxy statements and other proxy solicitation materials with the Department.[3] The Department’s regulations address the process and contents of these filings.
Most of the changes expand or clarify information that already is required to be disclosed in the proxy statement. With one exception described in the next paragraph, the changes take effect January 1, 2017.
The regulation also adds a new filing fee that must be paid, beginning March 20, 2016, when filing proxy solicitation materials with the state. Previously there was no fee to file proxy solicitation materials. The new filing fee has a $250 base amount plus an additional fee that varies depending on the total assets reported in the corporation’s last annual report. The additional fee runs between $250 and $25,000.
The changes to the disclosures required by the proxy regulations include:
- Many disclosures are expanded to include disclosures about both the corporation and its subsidiaries.[4]
- The number and percentage attendance at all board and committee meetings, including excused absences, must be disclosed. Previously, actual attendance was required to be disclosed only if a director attended less than 75%.
- Directorships of other entities[5] must be disclosed. Given the broad definition of “entity,” this may include “directorships” with nonprofit corporations, unrelated personal businesses, schools, tribes, heritage and educational foundations, family and settlement trusts, homeowners associations, estates, churches, utilities, cooperatives, and municipalities.
- The proxy regulations previously required, and continue to require, disclosure of certain “bad acts” by candidates and directors, including legal proceedings adverse to the corporation. The period covered was the previous 5 years. It has been changed to the previous 10 years. Pending criminal proceedings (not just convictions) and judgments for violating fiduciary duties now must be disclosed. “Minor offenses” do not need to be disclosed, but now this is defined by referring to the Alaska Rules of Minor Offence Procedures.[6]
- The requirement that the “bad acts” be “material to an evaluation of ability or integrity” has been removed. So, listed bad acts must be disclosed even if irrelevant to such an evaluation. However, even with this deletion the overall requirement that the proxy statement not be false or misleading remains in force[7] may compel disclosure of other information.
- Disclosure of material past or proposed financial transactions with insiders or their affiliates is expanded, and the purpose and amount of transactions now must be disclosed.
- Disclosure of specific compensation to named persons is for the five most highly compensated “persons of the corporation;” it is not limited to directors and officers. A highly compensated non-officer may be covered, for example.
- The proxy statement must describe the board’s leadership structure, including whether one person serves as both the president and chair or both the president and chief executive officer, and the board’s meeting attendance policy.
- Whenever the board submits a proposal to shareholders for a vote, the board must identify any directors opposing the proposal and include, as to proposals to amend the articles of incorporation or bylaws, the reasons against the proposal in addition to the reasons in favor of the proposal.
- The proxy statement now must describe the corporation’s nominating procedure for board candidates.
- In another new provision, the regulations provide some guidance about the effect of a candidate being included in a board’s proxy statement. A candidate named in the proxy statement who does not engage in additional proxy solicitation can rely on being in the board’s proxy statement. Presumably this means the candidate does not need to prepare and file his or her own proxy statement. If, however, the candidate solicits proxies other than through being included in the board’s proxy statement, the candidate must comply with the solicitation rules applicable to non-board solicitations. The board’s proxy statement may, or may not, satisfy those rules.
- The new regulation also makes clear that a candidate remains responsible for the accuracy and completeness of information provided to the board, though there is no protection for the board if it includes in its proxy statement inaccurate or incomplete information provided by a candidate.
- An independent candidate who prepares his or her own proxy solicitation materials must comply with disclosure rules similar to the rules that apply to board solicitations. Similar amendments were made to that regulation.
- If a complaint is filed with the Department alleging violation of the proxy regulations, the Department now is required to notify the alleged wrongdoer, if an investigation is opened, and of the Department’s decision. Notification of the corporation is optional, unless the corporation was notified of the complaint.
[1] The proxy regulations are at 3 A.A.C. 08.300 et seq. A copy of the changes is available at the ANCSA Resource Center.
[2] 43 U.S.C. § 1601 et seq.
[3] A.S. 45.55.139
[4] A definition of “subsidiary” is added by referring to the term as defined under the Alaska Corporations Code: a corporation in which the corporation owns, directly or indirectly, more than 50% of the voting power.
[5] A definition of “entity” was added to mean “an individual, sole proprietorship, partnership, joint venture, trust, association, firm, corporation or other organization, whether or not operated for profit.”
[6] Minor offenses include an offense for which a bail forfeiture amount has been authorized, such as traffic tickets, violation of a municipal code that cannot result in incarceration or loss of a valuable license, and strict liability fish and game and commercial fishing violations.
[7] 3 AAC 08.315
