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November 22, 2021

NYSE Amends Determination of “Votes Cast” Under Listed Company Manual Section 312.07


On November 19, 2021, the SEC approved the NYSE’s proposed amendment to the shareholder voting requirement set forth in Section 312.07 of the NYSE Listed Company Manual (Manual). Section 312.07 provides that, where shareholder approval is a prerequisite to the listing of any additional or new securities of a listed company, or where the NYSE rules require shareholder approval for any other matter, the minimum vote which will constitute shareholder approval for purposes of the NYSE requirement is a majority of “votes cast” on the particular matter. Section 312.07 is currently applicable to shareholder approval of stock issuances under Manual Sections 303A.08 (equity compensation) and 312.03.

Although the text of Section 312.07 did not address the treatment of abstentions, the NYSE has historically advised companies that abstentions should be treated as votes cast for purposes of Section 312.07, such that a proposal would be deemed approved only if the votes in favor exceed the aggregate of the votes cast against plus abstentions (i.e., giving abstentions the effect of a vote against). The corporate laws of many states, however, including Delaware, allow companies to specify in their governing documents that votes cast for purposes of a shareholder vote include yes and no votes (but not abstentions), such that a proposal succeeds if the votes in favor exceed the votes against. Consistent with those state laws, many public companies have bylaws indicating that abstentions are not treated as votes cast.

The NYSE has amended Section 312.07 to provide that a company must determine whether a proposal has been approved by a majority of the votes cast for purposes of Section 312.07 in accordance with its own governing documents and any applicable state law, which would permit a company to disregard abstentions if its governing documents and any applicable state law so provide. In its proposal, the NYSE noted that this is consistent with Nasdaq’s approach. The NYSE also noted that the amendment will help ensure that shareholders properly understand the implications of choosing to abstain on a proposal subject to approval under NYSE rules.

© Arnold & Porter Kaye Scholer LLP 2021 All Rights Reserved. This Advisory is intended to be a general summary of the law and does not constitute legal advice. You should consult with counsel to determine applicable legal requirements in a specific fact situation.