Texas introduces restrictions on small shareholder proposals
May 9, 2025
Texas has put forward a bill imposing new restrictions on shareholder eligibility to submit proposals, potentially limiting the voice of small investors seeking change.
The bill, which passed 45 to 5, would impose restrictions such as requiring shareholders to own $1 million or 3% of voting stock, disqualifying those who have held shares for less than six months and requiring the solicitation of 67% of shareholders before a proposal can appear on the proxy.
These thresholds risk shutting out small and mid-sized shareholders, even those with long-term holdings, from raising governance concerns. Even investors who meet the SEC’s longstanding standard of $2,000 held for three years would be entirely excluded. In practice, only the largest institutions, many of which have never filed a proposal, would qualify to participate.
In theory, companies like Tesla, which have not yet filed their proxies, could choose to follow the bill by updating their rules and noting it in their proxy. This would let them block all small shareholder proposals that have been submitted, such as recent requests to remove supermajority rules and board declassification.
This bill also conflicts with 80 years of federal law under the Securities Exchange Act of 1934 and SEC Rule, and it risks being preempted under the Supremacy Clause of the US Constitution.
In a public plea, urging other shareholders to oppose the bill, James McRitchie, a long-time small shareholder in over 200 public companies, said: “Shareholder proposals are not distractions—they are essential to preventing board entrenchment, addressing material risks and allowing owners to engage responsibly,”
“This bill sends a clear message: only the ultra-wealthy deserve a voice in the governance of America’s largest corporations. That message is not only wrong—it is un-American.”
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Last Updated: 9 May 2025