In this earlier post, I commented on the preliminary proxy materials filed by P.A.M. Transportation Services, Inc. (nka PAMT Corp) At the time, my interest was the company's proposal to reincorporate in Nevada from Delaware. On October 31 of last year (which coincidentally is the anniversary of Nevada's admission as a state), the stockholders approved the proposal. Interestingly, the proposal had changed.
The company originally bundled the reincorporation proposal with an increase in the authorized number of shares. This caught the eyes of the staff at the Securities and Exchange Commission, which commented:
We note that Proposal Three seeks approval of redomestication of the Company from a corporation organized under the laws of the State of Delaware to a corporation organized under the laws of the State of Nevada. We also note that approval of the redomestication includes approval of an increase in the authorized shares of the common stock of the Company from 50,000,000 shares to 100,000,000 shares. Please provide your analysis as to why you are not required to unbundle this proposal and provide shareholders with separate votes regarding these changes. Please refer to Rule 14a-4(a)(3) of Regulation 14A and Question 101.02 to Exchange Act Rule 14a-4(a)(3) Questions and Answers of General Applicability (Unbundling under Rule 14a-4(a)(3) Generally), available on our website.
The company responded by unbundling the proposal and ultimately the stockholder approved both proposals. A decade ago, I pointed out a logical inconsistency in the staff's position with respect to bundling. See What's The Matter With The SEC's Unbundling Interpretation? More fundamentally, the SEC staff should not be making comments on governance that are unrelated to disclosure. Whether a proposal may or may not be bundled is fundamentally a question of state law.
[View source.]
