Delaware has become the first state to propose a state-law alternative to SEC Rule 14a-8 that would preserve a route for non-binding shareholder proposals if the federal rule is rescinded, but with markedly higher ownership thresholds and strict limits on how many proposals reach company proxy materials.

On 9 November, the Council of the Corporation Law Section of the Delaware State Bar Association published a white paper proposing a new Section 214 of the Delaware General Corporation Law (DGCL). The framework would apply only to Delaware corporations with a market capitalisation of at least U$30 billion and would allow between one and three qualifying precatory proposals each year.

For investors, the trade-off is stark: qualifying proposals could face fewer substantive exclusion grounds, but far fewer shareholders could submit them. The potential implications of this proposal matters well beyond Delaware. More than two-thirds of Fortune 500 companies are incorporated in the state, giving changes to its corporate law potential implications across a substantial part of the US public market.

Delaware’s proposed departure from Rule 14a-8’s ownership thresholds offers a potential example of fragmentation if the federal rule is rescinded. The proposal also arrives amid growing competition between states for incorporations and IPOs.

Proposal access capped

The most significant structural departure from Rule 14a-8 is Delaware’s proposed “basket” system.

Companies valued between U$30 billion and U$50 billion could receive one qualifying proposal, those between U$50 billion and U$100 billion could receive two, and companies above U$100 billion could receive three.

The U$30 billion floor is itself significant. Rather than creating a general state-law substitute for Rule 14a-8 across Delaware-incorporated companies, the proposed regime would provide the new route only at the largest corporations.

For companies that do fall within the framework, the basket would also make access competitive. If more proposals qualify than there are available places, priority would go to proposals backed by proponents and co-filers with the largest aggregate shareholdings. An otherwise qualifying proposal could therefore miss the proxy simply because another is supported by investors holding more shares.

That changes the architecture of the shareholder proposal process. Access would depend not only on whether a proposal meets the statutory requirements, but potentially on the size of the holdings assembled behind it.

“The most notable part of the proposal is the introduction of a basket system,” said Thomas Bolger, Stewardship Team Lead at Minerva Analytics. “Only one to three precatory proposals could proceed, depending on the company’s market capitalisation, and where the basket is oversubscribed, priority would be determined by the shares held by proponents and their co-filers.

“Access is also considerably more restrictive than under Rule 14a-8, with much higher ownership thresholds and a five-year exemption for newly listed companies,” he added. “So, while Delaware is preserving a state-law route if Rule 14a-8 is rescinded, it is doing so through a significantly more company-friendly framework and would likely result in fewer proposals overall.”

Higher thresholds would change who can file

The proposal would also substantially raise the financial threshold for shareholders seeking access to company proxy materials.

Rule 14a-8 currently allows investors to qualify with holdings of U$2,000, U$15,000 or U$25,000, depending on whether the shares have been held continuously for three, two or one year respectively.

Under the Delaware proposal, an individual proponent would instead need to own at least U$250,000 of voting stock for one year. Up to nine co-filers of a single resolution could qualify collectively if their aggregate holdings reached U$1 million.

The difference could be particularly important for individual shareholders. Minerva analysis of 2025 filings found that individuals accounted for 41% of US shareholder proposals, compared with 18% from institutions and 14% from anti-ESG proponents.

Newly listed companies would generally sit outside the regime for five years. After that period, companies could opt out entirely if shareholders approved the move.

The framework would also change the consequences of weak voting results. A proponent whose proposal received less than 15% support at either of the previous two applicable annual meetings could be prevented from submitting another proposal. Under Rule 14a-8, by contrast, resubmission restrictions apply to substantially similar proposals rather than generally attaching to the proponent, meaning a weak result on one issue does not ordinarily prevent the proponent from returning with a different proposal.

However, the Delaware proposal is not more restrictive in every respect: it contains fewer substantive grounds for excluding proposals than Rule 14a-8, omitting grounds including ordinary business and substantial implementation. Companies would also bear the burden of establishing that an exclusion was justified if challenged in the Delaware Court of Chancery. That creates the central tension in the proposed framework: fewer exclusion grounds do not mean broader access.

Minerva has previously warned that rescinding Rule 14a-8 could fragment shareholder proposal rights across state regimes, producing different eligibility rules, costs, deadlines and legal risks. Delaware’s draft provides an early indication of how materially those state-law rights could diverge from the existing federal process.

Shareholders have also sought to protect existing thresholds in response to the SEC’s 14a-8 rescission proposal. This has included striking a deal with Microsoft to preserve existing thresholds until next year and securing notable support on a proposal at Procter & Gamble’s 2026 AGM, while a similar proposal will be voted on at Oracle’s 18 November meeting.

DExit pressure shapes the backdrop

The proposal also arrives amid growing competition between US states for corporate incorporations.

Texas has positioned itself as an alternative to Delaware and has already legislated to permit higher shareholder proposal thresholds, part of the broader “DExit” debate over whether companies will continue to choose Delaware as their corporate home.

There are signs of greater competitive pressure. Delaware’s share of US-based IPO incorporations fell from 81.4% in 2024 to nearly 70% in 2025, although it remained the dominant US corporate jurisdiction.

Against that backdrop, Section 214 can be seen as an attempt to preserve a statutory shareholder proposal route while offering Delaware corporations a substantially more constrained framework than the existing federal regime.

The timing remains dependent on events in Washington. Rule 14a-8 remains in force, and the proposed Section 214 would not take effect unless the SEC ultimately rescinds it. A potential increase in political and congressional scrutiny of the SEC’s agenda following the success of the Democrats in the recent US midterms may influence the broader debate, but does not by itself determine whether the agency completes the rulemaking.

What happens next

The Delaware Council has opened a 60-day comment period on the draft. It plans to consider responses before preparing a revised version for approval by the Corporation Law Section and the Delaware State Bar Association’s Executive Committee.

If approved through that process, legislation would then go to the Delaware General Assembly during its 2027 session. The Council wants the framework settled before preparations for the 2028 proxy season begin.

In the meantime, Rule 14a-8 remains in force. Two decisions will determine the practical impact for investors: whether the SEC ultimately rescinds the federal rule, and how much the proposed Section 214 changes following Delaware’s consultation.

The immediate issue is therefore not simply whether Delaware preserves shareholder proposals, but which shareholders would still be able to use them. If Rule 14a-8 disappears and Section 214 survives consultation substantially intact, access at many of America’s largest companies would depend far more heavily on investor size, coalition-building and competition for a limited number of proposal slots.