Although I often write about initial listing standards, I realized that I have not yet blogged about the reduced ongoing listing standards for national exchanges. In this blog, I will cover the continued listing requirements for Nasdaq listed companies and in next week’s blog I will cover the NYSE/NYSE MKT. For a review of initial listing requirements for the Nasdaq Capital Markets and NYSE MKT see HERE.
Nasdaq Capital Markets
To continue listing on Nasdaq Capital Markets, a company is required to meet certain ongoing quantitative and qualitative requirements. NASDAQ also requires listed companies to meet stringent corporate governance standards.
In order to continue listing on Nasdaq Capital Markets a company must meet all of the following requirements: (i) at least 2 market makers; (ii) a $1 minimum bid price; (iii) at least 300 unrestricted round lot public shareholders; (iv) at least 500,000 publicly held shares; and (v) a market value of publicly held shares of at least $1 million.
In addition, a company must meet at least one of the following standards: (i) stockholders equity of at least $2.5 million; (ii) market value of listed securities of at least $35 million; or (iii) net income from continuing operations of $500,000.
The chart below summarizes these requirements.
| Requirements | Equity Standard | Market Value of
Listed Securities Standard |
Net Income
Standard |
| Listing Rules | 5550(a) and
5550(b)(1) |
5550(a) and
5550(b)(2) |
5550(a) and
5550(b)(3) |
| Stockholders’ equity | $2.5 million | N/A | N/A |
| Market Value of Publicly Held Shares | $1 million | $1 million | $1 million |
| Market value of listed securities | N/A | $35 million | N/A |
| Net income from continuing operations (in the latest fiscal year or in two of the last three fiscal years) | N/A | N/A | $500,000 |
| Unrestricted publicly held shares | 500,000 | 500,000 | 500,000 |
| Bid price | $1
|
$1
|
$1
|
| Unrestricted round lot shareholders | 300 | 300 | 300 |
| Market Makers | 2 | 2 | 2 |
Nasdaq Global Select and Nasdaq Global Market Companies
To continue listing on Nasdaq Global Select and Nasdaq Global Markets, a company is required to meet certain ongoing quantitative and qualitative requirements. NASDAQ also requires listed companies to meet stringent corporate governance standards.
In order to continue listing on Nasdaq Capital Markets a company must meet all of the following requirements: (i) a $1 minimum bid price; and (iii) at least 400 unrestricted round lot public shareholders.
In addition, a company must meet at least one of the following standards:
Equity Standard: (i) stockholders equity of at least $10 million; (ii) market value of publicly held shares of at least $5 million; (iii) at least 750,000 publicly held shares; and (iv) at least 2 market makers.
Market Value Standard: (i) market value of listed securities of at least $50 million; (ii) market value of publicly held shares of at least $15 million; (iii) at least 1,100,000 publicly held shares; and (iv) at least 4 market makers.
Total Assets/Total Revenue Standard: (i) total assets and total revenue of at least $50 million for each of the most recently completed fiscal year or two out of three of the most recently completed fiscal years; (ii) market value of publicly held shares of at least $15 million; (iii) at least 1,100,000 publicly held shares; and (iv) at least 4 market makers.
The chart below summarizes these requirements.
| Requirements | Equity Standard | Market Value of
Listed Securities Standard |
Net Income
Standard |
| Listing Rules | 5450(a) and
5450(b)(1) |
5450(a) and
5450(b)(2) |
5450(a) and
5450(b)(3) |
| Stockholders’ equity | $10 million | N/A | N/A |
| Market value of listed securities | N/A | $50 million | N/A |
| Total Assets and Total Revenues (in latest fiscal year or in two of last three fiscal years) | N/A | N/A | $50 million
and $50 million |
| Unrestricted publicly held shares | 750,000 | 1.1 million | 1.1 million |
| Bid price
|
$1 | $1
|
$1
|
| Unrestricted round lot shareholders | 400 | 400 | 400 |
| Market Makers | 2 | 4 | 4 |
Corporate Governance Requirements
Companies must meet the following corporate governance standards as set forth in the Listing Rule 5600 Series.
| Corporate Governance Requirement | Description |
| Distribution of Annual or Interim Reports | The company must make its annual and interim reports available to shareholders, either by mail or electronically through the company’s website. |
|
Independent Directors |
The Exchange has various requirements regarding a company’s independent directors and audit committee. Although generally the company’s board of directors is required to have a majority of independent directors, there are several exceptions, such as for a controlled company or foreign private issuers.
For a review of the new Nasdaq board diversity rules, see HERE.
For a review of Nasdaq board independence standards, see – HERE.
|
|
Audit Committee |
The company is required to have an audit committee consisting solely of independent directors who also satisfy the requirements of SEC Rule 10A-3 and who can read and understand fundamental financial statements. The audit committee must have at least three members. One member of the audit committee must have experience that results in the individual’s financial sophistication.
For a drill down on Nasdaq audit committee requirements, see – HERE.
For a drill down on NYSE MKT audit committee requirements, see – HERE. |
|
Compensation of Executive Officers |
The company is required to have a compensation committee consisting solely of independent directors and having at least two members. The compensation committee must determine, or recommend to the full board for determination, the compensation of the chief executive officer and all other executive officers. Controlled companies and foreign private issuers are exempt from this requirement. |
|
Nomination of Directors |
Independent directors must select or recommend nominees for directors. Controlled companies and foreign private issuers are exempt from this requirement. |
|
Board Diversity |
The company must have, or explain why it does not have, at least two members of its board of directors who are Diverse, including (i) at least one Diverse director who self-identifies as Female; and (ii) at least one Diverse director who selfidentifies as an Underrepresented Minority or LGBTQ+. The company must also disclose each director’s self-identified characteristics. For a review of Nasdaq board diversity requirements, see HERE. |
|
Code of Conduct |
The company must adopt a code of conduct applicable to all directors, officers and employees. |
|
Annual Meetings |
The company is required to hold an annual meeting of shareholders no later than one year after the end of its fiscal year. |
|
Solicitation of Proxies
|
The company is required to solicit proxies for all shareholder meetings. |
|
Quorum |
The company must provide for a quorum of not less than 33 1/3% of the outstanding shares of it voting stock for any meeting of the holders of its common stock. |
|
Conflict of Interest |
The company must conduct appropriate review and oversight of all related party transactions for potential conflict of interest situations.
|
| Shareholder Approval | The company is required to obtain shareholder approval of certain issuances of securities, including:
· Acquisitions where the issuance equals 20% or more of the pre-transaction outstanding shares, or 5% or more of the pre-transaction outstanding shares when a related party has a 5% or greater interest in the acquisition target (see HERE) · Issuances resulting in a change of control (see HERE) · Equity compensation (see HERE) · Private placements where the issuance equals 20% or more of the pre-transaction outstanding shares at a price less than the greater of book or market value (see HERE) |
|
Voting Rights |
Corporate actions or issuances cannot disparately reduce or restrict the voting rights of existing shareholders.
For a review of the voting rights rules, see – HERE. |
The Author
Laura Anthony, Esq.
Founding Partner
Anthony L.G., PLLC
A Corporate Law Firm
Securities attorney Laura Anthony and her experienced legal team provide ongoing corporate counsel to small and mid-size private companies, public companies as well as private companies going public on the Nasdaq, NYSE American or over-the-counter market, such as the OTCQB and OTCQX. For more than two decades Anthony L.G., PLLC has served clients providing fast, personalized, cutting-edge legal service. The firm’s reputation and relationships provide invaluable resources to clients including introductions to investment bankers, broker-dealers, institutional investors and other strategic alliances. The firm’s focus includes, but is not limited to, compliance with the Securities Act of 1933 offer sale and registration requirements, including private placement transactions under Regulation D and Regulation S and PIPE Transactions, securities token offerings and initial coin offerings, Regulation A/A+ offerings, as well as registration statements on Forms S-1, S-3, S-8 and merger registrations on Form S-4; compliance with the Securities Exchange Act of 1934, including registration on Form 10, reporting on Forms 10-Q, 10-K and 8-K, and 14C Information and 14A Proxy Statements; all forms of going public transactions; mergers and acquisitions including both reverse mergers and forward mergers; applications to and compliance with the corporate governance requirements of securities exchanges including Nasdaq and NYSE American; general corporate; and general contract and business transactions. Ms. Anthony and her firm represent both target and acquiring companies in merger and acquisition transactions, including the preparation of transaction documents such as merger agreements, share exchange agreements, stock purchase agreements, asset purchase agreements and reorganization agreements. The ALG legal team assists Pubcos in complying with the requirements of federal and state securities laws and SROs such as FINRA for 15c2-11 applications, corporate name changes, reverse and forward splits and changes of domicile. Ms. Anthony is also the author of SecuritiesLawBlog.com, the small-cap and middle market’s top source for industry news, and the producer and host of LawCast.com, Corporate Finance in Focus. In addition to many other major metropolitan areas, the firm currently represents clients in New York, Los Angeles, Miami, Boca Raton, West Palm Beach, Atlanta, Phoenix, Scottsdale, Charlotte, Cincinnati, Cleveland, Washington, D.C., Denver, Tampa, Detroit and Dallas.
Ms. Anthony is a member of various professional organizations including the Crowdfunding Professional Association (CfPA), Palm Beach County Bar Association, the Florida Bar Association, the American Bar Association and the ABA committees on Federal Securities Regulations and Private Equity and Venture Capital. She is a supporter of several community charities including the American Red Cross for Palm Beach and Martin Counties, Susan Komen Foundation, Opportunity, Inc., New Hope Charities, the Society of the Four Arts, the Norton Museum of Art, Palm Beach County Zoo Society, the Kravis Center for the Performing Arts and several others.
Ms. Anthony is an honors graduate from Florida State University College of Law and has been practicing law since 1993.
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