No-Action Letter for Dorian LPG Ltd. Permitted Exclusion of Duplicative Rights Plan Proposal
In Dorian LPG Ltd., 2017 BL 229502 (June 29, 2017), Dorian LPG Ltd. (“Dorian”) asked the staff of the Securities and Exchange Commission (“SEC”) to permit the omission of a shareholder proposal submitted by SEACOR Holdings Inc. ("Shareholder"), requesting Dorian amend its bylaws to require shareholder approval prior to the adoption of any rights plan and to require the redemption of rights issued under existing rights plan. The SEC issued the requested no action letter allowing the exclusion of the proposal under Rule 14a-8(i)(11).
Shareholder submitted a proposal providing that:
RESOLVED, that, pursuant to Section 88 of the Marshall Islands Business Corporations Act and Article N of the Articles of Incorporation (the “Articles”) of Dorian LPG Ltd. (the “Company”), the Articles are hereby amended by adding the following as Article O:
O. Stockholder Rights Plan.
(a) The Corporation will not adopt any “Rights Plan” (as defined below) without prior stockholder approval. For purposes of this Article, the term “Rights Plan” refers generally to any plan providing for the distribution of preferred stock, rights, warrants, options or debt instruments to the stockholders of the Corporation, designed to assist the Board of Directors in responding in a negative manner to unsolicited takeover proposals and significant stock accumulations by conferring certain rights on shareholders upon the occurrence of a “triggering event,” such as a tender offer or third party acquisition of a specified percentage of stock.
(b) The Corporation shall redeem the rights issued under any Rights Plan in effect as of the date these Articles were amended to add this Article O.
Dorian sought exclusion of the proposal from its proxy materials under subsections (i)(1), (i)(2), and (i)(11) of Rule 14a-8.
Rule 14a-8 provides shareholders with the right to insert a proposal in the company’s proxy statement. 17 CFR 240.14a-8. The shareholders, however, must meet certain procedural and ownership requirements. In addition, the Rule includes thirteen substantive grounds for exclusion. For a more detailed discussion of the requirements of the Rule, see The Shareholder Proposal Rule and the SEC and The Shareholder Proposal Rule and the SEC (Part II).
Rule 14a-8(i)(11) permits exclusion of a duplicative proposal. The purpose of this subsection is to eliminate a shareholder’s need to consider “substantially identical proposals.” Duplicative proposals need not be identical, and may vary in terms, scope, and phrasing. For a more detailed discussion of this exclusion, see Hillary Sullivan, The Exclusion of Duplicative Proposals under Rule 14a-8(i)(11), 93 Denv. L. Rev. Online 315 (2016).
Additionally, Rule 14a-8(i)(1) permits the exclusion of a proposal that is not a proper subject for action by shareholders under the laws of the jurisdiction of the company’s governing documents. Furthermore, Rule 14a-8(i)(2) permits the exclusion of a proposal that, if implemented, would cause the company to violate a law to which it is subject. For additional discussion on Rule 14a-8(i)(2), see Jason Haubenreiser, Rule 14a-8 and the Exclusion of Proposals the Violate the Law, 93 Denv. L. Rev. 213 (2016).
Dorian asserted the proposal should be excluded under Rule 14a-8(i)(11) because it “substantially duplicate[d]” an earlier proposal. Dorian argued Shareholder’s proposal was similar because both proposals called for Dorian’s board to redeem the existing shareholder rights plan and provide shareholders with an opportunity to vote on any subsequent rights plan. Dorian argued, while the Shareholder proposal was binding on the board and the earlier proposal was not, proposals need not be identical for the Shareholder proposal to qualify for exemption under the rule.
Alternatively, Dorian argued for exclusion under Rule 14a-8(i)(1) because the proposal substantively limited the board’s authority in responding to a takeover proposal, exceeding the power of shareholders according to Dorian’s governing documents. Dorian further argued for exclusion under Rule 14a-8(i)(2) because the proposal required the board to act without regard to its fiduciary duties, in violation of Marshall Islands law.
The SEC agreed with Dorian and found the Shareholder proposal “substantially duplicate[d]” another proposal. Because the other proposal was submitted prior to the Shareholder’s, and it would be included in Dorian’s 2017 proxy materials, the SEC concluded it would not recommend enforcement action if Dorian excluded the Shareholder’s proposal from its proxy materials in reliance of Rule 14a-8(i)(11).
The primary materials for this post can be found on the SEC website.