Question: An acquiror and a target company plan to engage in a business combination transaction. The acquiror is subject to the federal proxy rules and will file a proxy statement to solicit shareholder approval for the transaction. The target company is a non-reporting company that does not need to file a proxy statement to solicit its own shareholders. It does plan to issue press releases and make other public communications, including through its social media channels, to publicize the merits of the proposed transaction and its benefits for both companies’ shareholders. Could the target company’s public communications constitute a solicitation subject to the proxy rules?

Answer: Yes. A solicitation includes any “communication to security holders under circumstances reasonably calculated to result in the procurement, withholding or revocation of a proxy.” See Exchange Act Rule 14a-1(l)(1)(iii). Accordingly, a target company that does not plan to solicit its own shareholders could nevertheless be engaged in a solicitation of the acquiror’s shareholders if its public communications promote the proposed transaction or may be reasonably expected to influence the voting decisions of the acquiror’s shareholders. Any target company communication that constitutes a solicitation would be subject to the liability provision of Exchange Act Rule 14a-9, which prohibits materially false or misleading statements or material omissions, as well as the filing and information requirements of the federal proxy rules. Also see Question 132.01 below. [March 22, 2022]