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ARTICLE · 27 FEBRUARY 2018

Nasdaq Proposes Modifications To 20% Shareholder Approval Rule

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Nasdaq reasoned that "book value is not an appropriate measure of whether a transaction is dilutive or should otherwise require shareholder approval."

United StatesCorporate/Commercial Law

On February 13, 2018, Nasdaq proposed amendments to Listing Rule 5635(d), which currently requires shareholder approval when a company issues common stock (or securities convertible into or exercisable for common stock) for "less than the greater of book or market value" in a transaction other than a public offering involving the sale of 20% or more of the common stock outstanding or voting power prior to the issuance.

The Nasdaq proposal would – 

(i)   change the definition of market value for purposes of the shareholder approval rule, and

(ii)  eliminate the requirement for shareholder approval of issuances at a price less than book value but greater than market value.

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