The U.S. Securities and Exchange Commission voted to propose rules that would allow companies to use the Internet to satisfy proxy material delivery requirements.

Under current rules, proxy statements and annual reports must be delivered in paper form or, if the shareholder consents, they may be delivered electronically (for example, by e-mail). The electronic delivery option requires affirmative shareholder consent and currently is used only on a limited basis.

Under the proposed rules, a company could satisfy its obligation to furnish proxy materials to shareholders through a “notice and access” model. The company would post its proxy materials on a Web site (other than EDGAR) and would send a “Notice of Electronic Proxy Materials” at least 30 days before the date of meeting. The notice would have to contain certain information, and it would have to be written in plain English.

The SEC suggests that the rules would potentially have two significant benefits: they could result in a substantial decrease in the expense incurred by issuers to comply with the proxy rules; and, they would provide persons other than the company with a more cost-effective means to undertake their own proxy solicitations.

Persons other than the company that are soliciting proxies would be able to rely on the proposed “notice and access” model in substantially the same manner as the company. Because a competing solicitation likely would begin only after the company began its solicitation, the notice would have to be provided to shareholders by the later of 30 days before the meeting or 10 days after the company filed its proxy materials.

The proposed rules would continue to permit a soliciting person conducting a proxy solicitation to limit its solicitation to shareholders who are willing to access the soliciting person’s proxy materials electronically. Under such a limited solicitation, the soliciting person would have no obligation to deliver paper or e-mail copies of the proxy materials to anyone. Unlike a company, a soliciting person also would not have to deliver a notice to shareholders unless the soliciting person wanted to deliver the proxy card or request for voting instructions to shareholders instead of posting it on a website.

The proposals are out for comment for 60 days.