DEF: Tortoise Energy Infrastructure and Sustainable Impact Funds Announce Annual Meeting Agenda and Director Nominees Amidst Shareholder Litigation

Tortoise Energy Infrastructure Corporation (TYG) and Tortoise Sustainable and Social Impact Term Fund (TEAF) will hold their combined annual meeting on August 14, 2025, seeking stockholder votes on director elections and auditor ratification, while addressing ongoing shareholder litigation and a board declassification proposal.

Summary

• The combined annual meeting for Tortoise Energy Infrastructure Corporation (TYG) and Tortoise Sustainable and Social Impact Term Fund (TEAF) will be held on Thursday, August 14, 2025, at 10:00 a.m. Central Time in Overland Park, Kansas.
• Stockholders will be asked to elect three directors for each Company: Thomas Florence and Andrew Iseman for three-year terms expiring at the 2028 Annual Meeting, and Alexandra Herger for a one-year term expiring at the 2026 Annual Meeting.
• Stockholders will also vote to ratify the selection of Tait, Weller & Baker LLP as the independent registered public accounting firm for the fiscal year ending November 30, 2025.
• The Board of Directors of each Company unanimously recommends voting FOR all director nominees and FOR the ratification of Tait, Weller & Baker LLP.
• Despite a precatory proposal approved by Saba Capital Master Fund, Ltd. at the 2024 Annual Meeting concerning declassification of the Board, the Board has decided not to propose action to effect such declassification at the 2025 Annual Meeting, citing its belief that a classified Board serves the best interests of each Company and its stockholders by promoting independence, accountability, stability, and continuity.
• The number of directors for each Company will increase from four to five, effective as of the Annual Meeting, with Alexandra Herger filling the new Class I director vacancy.
• Two ongoing shareholder litigations are detailed: the 'Demand Futility Litigation' (Nathanson, et al. v. Tortoise Capital Advisors, LLC, Case No. 24-C-3-002372), filed May 2023, which was dismissed in February 2024 (claims time-barred or failure to plead demand futility) but is currently pending appeal regarding a breach of fiduciary duty claim; and the 'Demand Refused Litigation' (Nathanson, et al. v. Tortoise Capital Advisors, LLC, Case No. C-24-CV-24-004103), filed November 22, 2024, alleging wrongful refusal of a demand to initiate litigation, which is stayed pending the resolution of the appeal in the Demand Futility Litigation.
• Ernst & Young LLP (EY) was dismissed as the independent registered public accounting firm on April 8, 2025, and Tait, Weller & Baker LLP was engaged. EY's reports for fiscal years ended November 30, 2024, and 2023, did not contain adverse opinions or disclaimers, but TYG had a material weakness in internal controls related to income tax accounting for its anticipated conversion to a Regulated Investment Company, which was remediated by November 30, 2023.
• Audit fees billed by EY for TYG were $180,814 in 2024 and $142,050 in 2023. For TEAF, audit fees were $108,050 in 2024 and $97,400 in 2023. Tax fees for TYG were $26,103 in 2024 and $78,549 in 2023. For TEAF, tax fees were $20,453 in 2024 and $19,724 in 2023.
• As of May 31, 2025, Tortoise Capital Advisors, L.L.C. (the Adviser) had approximately $8.9 billion of client assets under management.
• Saba Capital Management, L.P. holds 1,549,226 shares (11.48%) of TEAF common stock and 625,915 shares (5.81%) of TYG common stock as of May 31, 2025.
• Prudential Financial Inc. holds 3,800,000 shares (97.5%) of TYG preferred stock as of May 31, 2025.
• Morgan Stanley and Morgan Stanley Smith Barney LLC collectively hold 960,816 shares (8.9%) of TYG common stock as of May 31, 2025.

Sentiment

Score: 5

Explanation: The document is neutral in tone, primarily a procedural proxy statement. While it addresses ongoing litigation and a contentious governance issue (board declassification), it presents these facts without overt positive or negative framing, focusing on the Board's rationale and legal status. The remediation of the material weakness is a positive, but the ongoing litigation and refusal to declassify are negatives. Overall, it balances out to neutral.

Positives

• The Board unanimously recommends all director nominees and the ratification of the new auditor, indicating internal alignment.
• The material weakness in internal controls for TYG, related to income tax accounting, was successfully remediated by November 30, 2023.
• The Board is increasing its size from four to five directors, adding Alexandra Herger, which could enhance oversight and governance.
• All directors demonstrated strong engagement by attending at least 75% of Board and committee meetings during fiscal year 2024.
• The Board's leadership structure includes a Lead Independent Director and regular meetings of independent directors outside management's presence, supported by independent legal counsel, which strengthens independent oversight.

Negatives

• The Board decided not to propose declassification of the Board at the 2025 Annual Meeting, despite a precatory shareholder vote in favor of declassification at the 2024 Annual Meeting, which may be viewed as unresponsive to shareholder sentiment.
• Ongoing shareholder litigation (Demand Futility Litigation and Demand Refused Litigation) alleges breach of fiduciary duties, gross negligence, and improper use of leverage by the Adviser and Defendant Directors, creating legal uncertainty and potential costs.
• The Demand Futility Litigation was dismissed on procedural grounds (time-barred or failure to plead demand futility), not on the merits, and the appeal is still pending, indicating continued legal challenge.
• The Demand Refused Litigation, alleging wrongful refusal of demand, is stayed pending the appeal of the Demand Futility Litigation, prolonging the legal dispute.
• TYG previously experienced a material weakness in internal controls related to income tax accounting, although it has since been remediated.

Risks

• Litigation risk: Ongoing shareholder lawsuits could result in adverse judgments, settlements, or significant legal expenses, including potential mandatory indemnification payments to the Adviser and Board members, impacting financial performance and reputation.
• Operational risk: The Board's risk management oversight is subject to inherent limitations, including the inability to identify all potential risks, the impracticality or cost-ineffectiveness of eliminating certain risks, and the potential for processes, procedures, and controls to be limited in their effectiveness.
• Investment-related risks: The Companies acknowledge that it may be necessary to bear certain investment-related risks to achieve their goals and objectives, which could lead to volatility or losses.
• Information risk: Reports received by directors regarding risk management matters are typically summaries and may be inaccurate or incomplete, potentially hindering effective oversight.

Future Outlook

The document primarily focuses on past events, current governance, and upcoming shareholder votes. It does not provide specific forward-looking financial guidance or strategic outlook beyond the Board's belief in maintaining a classified board for stability and continuity.

Management Comments

• The Board has decided not to propose action to effect such declassification at the 2025 Annual Meeting, following the Boards careful consideration of (A) extensive and confidential engagement by the Board and members of management with various stockholders following the 2024 Annual Meeting, (B) numerous other steps taken by the Board and management of both Companies since the 2024 Annual Meeting to address many of the issues raised by Saba and (C) the Boards belief, as discussed in the Companies 2024 Annual Meeting proxy statement, that maintaining a classified Board of Directors at this time continues to serve the best interests of each Company and its stockholders by appropriately supporting the independence and accountability of the directors to each Companys stockholders while also promoting stability and continuity of management for each Company at the Board level.
• The Board of TYG considered the Demand Review Committees findings and concluded that the claims asserted in the Demand were valueless and, if pursued, may actually result in losses to TYG in the form of mandatory indemnification payments to the Adviser and the Board of TYG for the cost of litigation.
• The Board of Directors also believes that its leadership structure not only facilitates the orderly and efficient flow of information to the Independent Directors from management, but also enhances the independent and orderly exercise of its responsibilities.

Industry Context

The document pertains to two closed-end funds, Tortoise Energy Infrastructure Corporation (TYG) and Tortoise Sustainable and Social Impact Term Fund (TEAF), managed by Tortoise Capital Advisors, L.L.C. The focus on energy infrastructure (TYG) and sustainable/social impact (TEAF) reflects specific investment themes within the closed-end fund sector. The ongoing shareholder activism by Saba Capital Management, L.P. (a known activist investor in closed-end funds) regarding board declassification is a common theme in corporate governance debates across various industries, particularly in funds where activists seek to unlock shareholder value. The change in auditors is a routine but notable event.

Comparison to Industry Standards

• The document does not provide specific comparisons to other companies or projects. It mentions that the Audit and Valuation Committee's structure and independence align with NYSE listing standards and the 1940 Act.
• The Board's decision to maintain a classified board, despite a precatory shareholder vote for declassification, contrasts with a growing trend in corporate governance towards declassified boards, which are often seen as enhancing accountability to shareholders.

Management Changes

Corporate Governance

Legal Proceedings

• Demand Futility Litigation (Nathanson, et al. v. Tortoise Capital Advisors, LLC, Case No. 24-C-3-002372): Filed May 2023, alleging breach of fiduciary duties and gross negligence by TYG, the Adviser, and current/former directors, concerning supervision of the Adviser, leverage use, management during 2020 energy market volatility, and 2020 bylaw amendments. Also sought rescission of advisory contracts and declaratory judgment on control share provision (latter dismissed). Dismissed February 16, 2024, due to claims being time-barred or failure to plead demand futility. Appeal pending in Appellate Court of Maryland (No. 0370, September Term, 2024) regarding breach of fiduciary duty claim.
• Demand Refused Litigation (Nathanson, et al. v. Tortoise Capital Advisors, LLC, Case No. C-24-CV-24-004103): Filed November 22, 2024, by a stockholder whose demand for litigation against the Adviser and Defendant Directors was refused by the Board. Alleges wrongful refusal of demand and seeks to bring the same breach of fiduciary duty claims as in the Demand Futility Litigation. Stayed on May 28, 2025, pending resolution of the appeal in the Demand Futility Litigation to preserve judicial economy and avoid inconsistent rulings.

Related Party Transactions

• Tortoise Capital Advisors, L.L.C. serves as the investment adviser to both Companies, and its CEO, Thomas Florence, is an interested director.
• The Adviser paid Ernst & Young LLP $33,850 in 2023 and $35,300 in 2024 for tax and other non-audit services, which were not required to be preapproved by the Audit and Valuation Committee.

Stakeholder Impact

• Shareholders: Directly impacted by the proposals to elect directors and ratify auditors. The Board's decision not to declassify the board, despite a precatory vote, may concern some shareholders (e.g., Saba Capital). Ongoing litigation could create uncertainty or potential costs.
• Management/Directors: The election of directors directly impacts the composition of the Board. The litigation targets current and former directors and the Adviser.
• Auditors: Tait, Weller & Baker LLP will benefit from the engagement, while Ernst & Young LLP has been dismissed.

Next Steps

• Stockholders are to vote on director elections and auditor ratification at the Annual Meeting on August 14, 2025.
• The appeal in the Demand Futility Litigation remains pending.
• The Demand Refused Litigation is stayed pending the resolution of the appeal in the Demand Futility Litigation.
• Alexandra Herger's one-year term as director will expire at the 2026 Annual Meeting, after which it is anticipated she would stand for election to a new three-year term.
• Stockholders can submit proposals for the 2026 Annual Meeting by March 16, 2026.

Key Dates

Recommendation

Keywords

Tortoise Energy Infrastructure Corporation, TYG, Tortoise Sustainable and Social Impact Term Fund, TEAF, SEC filing, proxy statement, annual meeting, director election, auditor ratification, corporate governance, shareholder litigation, board declassification, closed-end fund, investment management, financial reporting, risk management, Saba Capital, Tait Weller & Baker LLP, Ernst & Young LLP