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In November 2015, The Nasdaq Stock Market ("Nasdaq") announced that it is seeking public comments on the rules for listed companies to obtain shareholder approval prior to issuing securities in connection with (i) acquisitions, (ii) equity-based compensation, (iii) a change of control and (iv) private placements amounting to 20% or more of the company's outstanding common stock or voting power. Under the existing rules, foreign private issuers may claim an exemption from the shareholder approval rule by following their home country practice, but are required to publicly disclose claiming the exemption and provide Nasdaq with a written statement from the company's counsel certifying that the company's practices are not prohibited by the home country's laws.
Specifically, in connection with the shareholder approval requirement for private placements involving the issuance of common stock or securities convertible into common stock equal to 20% or more of the common stock or voting power outstanding at a price less than the greater of book or market value of the stock, Nasdaq is seeking comments regarding the following, among others:
- the appropriate method of determining market value (currently, market value is measured by reference to the closing bid price);
- whether Nasdaq should eliminate the book value measurement prong of the rule;
- whether a higher percentage threshold should be adopted for smaller companies;
- whether a company should be permitted to obtain pre-approval to issue shares in capital raising or acquisition transactions on a periodic basis, and, if so, the terms that must be included in a pre-approval; and
- whether the percentage threshold requiring shareholder approval should be based on a sliding scale depending on the size of the discount to market price.
The comment period will run until 15 February 2016. The solicitation of comments notice is available at: https://listingcenter.nasdaq.com/assets/Shareholder%20Approval%20Comment%20Solicitation.pdf
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