The 20% Rule – Private Placements
Nasdaq and the NYSE American both have rules requiring listed companies to receive shareholder approval prior to issuing twenty percent (20%) or more of the outstanding securities in a transaction other than a public offering at a price less than the Minimum Price, as defined in the rule. Nasdaq Rule 5635 sets forth the circumstances under which shareholder approval is required prior to an issuance of securities in connection with: (i) the acquisition of the stock or assets of another company (see HERE); (ii) equity-based compensation of officers, directors, employees or consultants (see HERE); (iii) a change of control (see HERE); and (iv) transactions other than public offerings. NYSE American Company Guide Sections 711, 712 a 713 have substantially similar provisions.
Nasdaq and the NYSE recently amended their rules related to issuances in a private placement to provide greater flexibility and certainty for companies to determine when a shareholder vote is necessary to approve a transaction that
