This week's Corporate news roundup includes information regarding the SEC's new guidance for companies with corporate versus individual selling stockholders and its no action guidance effectively cutting back on companies' right to exclude proxy access shareholder proposals, and the new EPA rules intended to reduce formaldehyde vapor offgassing from specified wood products:

SEC ISSUES NO-ACTION LETTER CUTTING BACK ON COMPANY RIGHT TO EXCLUDE PROXY ACCESS SHAREHOLDER PROPOSAL

On July 21, 2016, the SEC issued a no-action letter denying a company's request to exclude from the company's proxy materials a shareholder proposal that the company amend its proxy access bylaws. The company had relied on Exchange Act Rule 14a-8(i)(10) in its assertion that it had already substantially implemented the proposal by adopting its own proxy access bylaw, but the SEC rejected that argument because it was unable to conclude that the company's proxy access bylaws compared favorably with the shareholder proposal's guidelines so as to meet the test for exclusion. Following the SEC's October 2015 issuance of a Staff Legal Bulletin limiting companies' ability to exclude shareholder proposals, the SEC had issued a string of no-action letters in February 2016 allowing companies to rely on Exchange Act Rule 14a-8(i)(10) in their assertion that their own proxy access bylaws fulfilled a shareholder proposal's essential objectives and therefore the proposal was already substantially implemented. This recent no-action letter appears to cut back companies' ability to rely on their own proxy access bylaws to exclude shareholder proxy access proposals. For more information, click here.

EPA ISSUES RULE INTENDED TO REDUCE FORMALDEHYDE VAPORS FROM WOOD PRODUCTS

On July 27, 2016, the EPA issued a rule intended to reduce exposure to formaldehyde vapors from wood products that are produced domestically or imported into the United States. Formaldehyde is used as an adhesive in a variety of products made from hardwood plywood, medium density fiberboard and particleboard as well as household and other finished goods containing these products, and exposure to formaldehyde may cause adverse health effects. The EPA will issue testing requirements to ensure that products comply with the new standards as well as establishing eligibility requirements for third-party certifiers who will need to be EPA-accredited in order to test products. The EPA also ensured that the new rule is consistent with the California requirements for composite wood products. For more information, click here.

SEC REVISES C&DI RELATING TO SELLING SHAREHOLDER DISCLOSURE

The SEC recently revised its Regulation S-K Compliance and Disclosure Interpretations (C&DIs) to clarify that, as to selling shareholder entities, a company must disclose material relationships between it and the selling shareholder entity, as well as information about any entities or natural persons that have control over the selling shareholder or had a material relationship with the company (or any of predecessors or affiliates thereof) within the past three years. The disclosure must identify each person or entity and describe the nature of any relationships. The C&DI previously provided that, as to a selling shareholder entity, the company's required disclosure was limited to the identity of any persons who had voting or investment control over the company's securities owned by the entity, a less burdensome disclosure than the current requirement. For more information, click here.

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