No-Action No More: SEC Modifies No-Action Process Ahead of Proxy Season

On November 17, 2025, the Division of Corporation Finance (the “Division”) of the Securities and Exchange Commission announced significant changes to its handling of shareholder proposals for the 2025–2026 proxy season. Citing limited resources and a backlog of registration statements following the government shutdown, the Division is departing from its longstanding practice of providing substantive responses to most requests from companies seeking to exclude shareholder proposals in their proxy materials.

This operational rollback applies to the current proxy season, which spans October 1, 2025, to September 30, 2026, as well as to pending no-action requests submitted before October 1, 2025.

The “Unqualified Representation” Mechanism

Under the revised approach, the Division will no longer express its views on a company’s basis for excluding a proposal under Rule 14a-8. Rather, companies wishing to exclude shareholder proposals must still comply with Rule 14a-8(j), which requires notifying the SEC and proponents “no later than 80 calendar days before it files its definitive proxy statement and form of proxy with the Commission.” However, under the new procedure, to receive a response from the Division’s staff, “the company or its counsel must include, as part of its notification . . . an unqualified representation that the company has a reasonable basis to exclude the proposal based on the provisions of Rule 14a-8, prior published guidance, and/or judicial decisions.”[1]

Upon receipt of this representation, the Division will issue a letter “indicating that, based solely on the company’s or counsel’s representation, the Division will not object if the company omits the proposal from its proxy materials.” The Division emphasized that it will neither evaluate this representation nor express a view on the merits of the exclusion. As a result, the burden of determining the legitimacy of an exclusion rests on the company’s and its counsel’s interpretation of existing guidance.

Impacts on Shareholders

With substantive responses suspended for most exclusion bases, shareholders effectively lose the primary mechanism for resolving proposal eligibility disputes. Instead of a substantive determination on the company’s position, proponents will now receive only a notice containing the company’s “unqualified representation” that a “reasonable basis” for exclusion exists. Because the Division will not assess the adequacy of these representations, shareholder proponents must independently evaluate the company’s reasoning using existing SEC guidance.[2]

The most immediate risk to shareholders is the transfer of enforcement costs from the SEC to the proponent. Previously, a successful no-action challenge ensured, without litigation, that the proposal would be included in the proxy statement. Under the new process, if a company improperly excludes a proposal based on its unqualified representation, the shareholder’s only remaining remedy is to seek an injunction in federal court. The expense, delay, and complexity of litigation will deter many institutional and retail investors as well as non-profits that frequently sponsor proposals, thereby creating a chilling effect in which only well-resourced shareholders can realistically contest exclusions.

Finally, the Division’s withdrawal from substantive review stunts the incremental development of regulatory guidance. The no-action process has long served as an informal source of precedent—indeed, the Division cites this feature as supporting its decision to no longer review no-action requests. However, without new staff interpretations, application of Rule 14a-8 will likely become inconsistent across issuers, increasing uncertainty and complicating shareholders’ ability to effect governance strategies, as well as prevent further development of the rule in light of emerging issues like cybersecurity, artificial intelligence, and politics.

[1] In a footnote to its announcement, the Division notes, somewhat contradictorily to its new position, that “[p]rior staff responses to Rule 14a-8 no-action requests are not binding and reflect only informal staff views” and “prior staff response[s] indicating that the staff was unable to concur with a company’s view that a proposal may be excluded does not mean that companies cannot form a reasonable basis to exclude the same or a similar proposal.”

[2] A chronological compilation of previous no-action responses issued under Rule 14a-8 for prior seasons is available here: https://www.sec.gov/rules-regulations/shareholder-proposals/no-action-responses-issued-under-rule-14a-8-prior-seasons.