Regulatory: Director liability for proxy statement disclosure

Recent lawsuits highlight directors’ duty to properly inform shareholders

Shareholders have brought a number of recent lawsuits against companies alleging, among other things, that the proxy statements used to solicit their votes were false or misleading. These lawsuits stand as a reminder that when a company is soliciting shareholder votes, directors have a duty to shareholders to ensure that the proxy statement fully and accurately discloses the material facts necessary for shareholders to make an informed vote.

This duty arises under Section 14(a) of the Securities Exchange Act of 1934, specifically Rule 14a-9 promulgated thereunder. Rule 14a-9 prohibits a company from soliciting the votes of its shareholders with a proxy statement that contains materially false or misleading information or that fails to disclose material information that is necessary for full and fair disclosure to shareholders. 

Contributing Author

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Peter Fetzer

Peter Fetzer is a partner with Foley & Lardner LLP and focuses his practice on securities regulation, mergers and acquisitions, corporate governance and general corporate...

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