Delaware proposes state law regime for precatory shareholder proposals

Background

As we wrote in our prior client memo, on September 16, 2026, the SEC proposed to rescind Rule 14a-8. The Council of the Corporation Law Section’s (the “Council”) assessment is that, in the absence of Rule 14a-8, neither the DGCL nor Delaware case law directly addresses whether shareholders have a right under Delaware law to submit precatory proposals for shareholder vote. The white paper offers an approach to fill the void and provide certainty. The white paper is subject to comment.

Key provisions

Effective only upon recission of Rule 14a-8. This statute does not affect the 2027 proxy season. In fact, the timing of effectiveness is unclear because the proposed DGCL § 214 would not operate unless and until the SEC’s rescission of Rule 14a-8 becomes effective. The white paper is ambiguous about what happens if Rule 14a-8 rescission becomes effective but then is stayed or vacated.

Eligibility thresholds are significantly higher than under Rule 14a-8. A proponent must beneficially own $250,000 of the company’s voting stock individually, or $1 million together with up to nine co-filers, held continuously for 365 days ending on the 30th day before the submission deadline, compared to $2,000 to $25,000 held for one to three years under Rule 14a-8 today. The proponent must provide proof of holdings and undertake to hold the requisite shares through the annual meeting. 

Precatory proposals would be allowed only at the largest companies, and there are caps based on company size. Only shareholders of Delaware corporations with a market capitalization of $30 billion or more would be entitled to submit precatory proposals for shareholder vote. Companies are separated into three tiers based on their market capitalization measured ten days before the record date for notice of the prior year’s annual meeting, with a maximum number of precatory proposals permitted as follows

• Tier 1 Corporation (market capitalization above $100 billion): limited to three precatory proposals
• Tier 2 Corporation (market capitalization between $50 billion and $100 billion): limited to two precatory proposals
• Tier 3 Corporation (market capitalization between $30 billion and $50 billion): limited to one precatory proposal

If more precatory proposals are submitted than allowed by the cap, those backed by the largest aggregate share ownership have priority.

Proponents must satisfy procedural requirements similar to Rule 14a-8. The proposal, together with a supporting statement, must not exceed 500 words in length. Submissions must be received by the company no later than 180 days before the anniversary of the company’s prior annual meeting. No shareholder may submit, or support as a co-filer, more than one precatory proposal at the same company in the same year. The proponent or its representative must present the proposal at the annual meeting.

The resubmission standard would bar a proponent (emphasis added) whose precatory proposal drew less than 15% of votes cast at either of the two preceding meetings. This is different than Rule 14a-8, which bars resubmission of similar proposals based on votes previously received.

Similar to Rule 14a-8, the company must notify the proponent of procedural deficiencies within 14 days, after which the proponent has 14 days to remediate the deficiency. The company must notify all proponents of its final determination within 60 days after the receipt of the proposal.

Substantive bases are much more limited than Rule 14a-8. The non-procedural basis for a company to determine that a precatory proposal can be excluded from the proxy statement includes:

• The proposal expressly questions the character of one or more director nominees
• The proposal primarily seeks to redress a personal claim or grievance
• The proposal asks for a policy or other arrangement that circumvents this statute (including lower ownership thresholds or allowing additional proposals)
• The proponent is, or is acting on behalf of or controlled by, an officer or director
• No rational person would determine that the proposal is relevant to the corporation or its business

The regime does not include certain key substantive bases under Rule 14a-8 — ordinary business, substantial implementation and violation of law.

Qualifying proposals must be included in the company’s proxy materials. Qualifying precatory proposals that have not been withdrawn would appear in the company’s proxy statement and proxy card. The company could include an opposition statement. 

Private ordering is largely foreclosed, although companies can continue to negotiate withdrawals and voluntarily include precatory proposals in their proxy materials. A company’s governing documents cannot add or reduce requirements contrary to the statute. There are no “proposal access” bylaws contemplated. However, a board retains discretion to submit any precatory proposal for a vote voluntarily.

Newly public companies have five years without precatory proposals. The regime would not apply to a company until the first annual meeting after the fifth anniversary of its initial listing, unless the company elects in its charter for the regime to apply earlier.

Companies may opt out of precatory proposals entirely five years after going public, but only if shareholders approve. A company’s only alternative to the regime is to opt out entirely, which would foreclose all precatory proposals, but this would require shareholder approval.

The Court of Chancery adjudicates disputes. The proponent may litigate over the company’s determination to exclude its precatory proposal in the Court of Chancery within 30 days of the company’s determination notice. The company bears the burden of establishing that an exclusion was proper.

Binding proposals are not affected. The white paper does not affect binding proposals, which would continue to be made under companies’ advance notice provisions when applicable and do not need to be included in a company’s proxy statement under Delaware law.

Sole method of submitting precatory proposals for shareholder vote. The regime would be the only method of submitting precatory proposals for shareholder vote. A proponent would not be able to submit a precatory proposal that does not comply with the statutory requirements for shareholder vote, even if the proponent is soliciting proxies using its own proxy materials. This effectively eliminates a proponent’s ability to run a proxy contest with only precatory proposals and no nominees (a zero-slate campaign), as we highlighted in our previous client memo.

Next steps

Comments are due within 60 days of the white paper’s release. The Council will review comments and prepare a revised draft for a vote of the Corporation Law Section. If the Section approves, the draft goes to the DSBA Executive Committee and then to the General Assembly, timed so the rules are settled before preparation for the 2028 proxy season begins. 

To state the obvious, the proposed regime would only be applicable to Delaware corporations. It is unclear whether other states would take up similar statutes, and whether companies incorporated in jurisdictions outside of Delaware would advocate for such provisions or would prefer not to enable any precatory proposal regime under their state law.