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Frequently Asked Questions
Must a Nasdaq-listed company hold an annual shareholder meeting?    
Identification Number
80
Yes. Listing Rule 5620(a) requires that each issuer listing common stock or voting preferred stock, and their equivalents, shall hold an annual meeting of shareholders.  
 
Publication Date*: 7/31/2012 Identification Number: 80 Mailto Link
Frequently Asked Questions
Must a company provide notice to Nasdaq about its shareholder meeting?
Identification Number
85
A company that files its proxy statement via EDGAR in connection with an annual shareholder meeting does not have to provide any additional notice to Nasdaq about its annual meeting. A company that does not file a proxy via EDGAR must send its proxy statement or other shareholder notice to Listing Qualifications via email at continuedlisting@nasdaq.com no later than when it is mailed to shareholders.  
 
Publication Date*: 7/31/2012 Identification Number: 85 Mailto Link
Frequently Asked Questions
Are Nasdaq-listed companies required to solicit proxies for shareholder meetings?    
Identification Number
168
Yes. Under Listing Rule 5620(b), each company is required to solicit proxies and provide proxy statements for all shareholder meetings. It must also provide copies of its proxy solicitation to NASDAQ. If the company files its proxy statement via EDGAR, it has fulfilled its notification requirement with Nasdaq. However, under Listing Rule 5615(a)(3) a Foreign Private Issuer may follow its home country practice in lieu of this requirement. See Non U.S. Companies FAQs.  
 
Publication Date*: 7/31/2012 Identification Number: 168 Mailto Link
Frequently Asked Questions
Are all companies subject to the annual meeting requirements?    
Identification Number
81
Pursuant to IM-5620, no. The requirement to hold an annual meeting is not applicable to issuers listing the following types of securities: securities listed pursuant to Listing Rule 5730(a) (such as Trust Preferred Securities and Contingent Value Rights), unless the listed security is a common stock or voting preferred stock equivalent (e.g., a callable common stock); Portfolio Depository Receipts listed pursuant to Listing Rule 5705(a); Index Fund Shares listed pursuant to Listing Rule 5705(b); or Trust Issued Receipts listed pursuant to Listing Rule 5720. Notwithstanding, if the issuer also lists common stock or voting preferred stock, or their equivalent, the issuer must still hold an annual meeting for the holders of that common stock or voting preferred stock, or their equivalent.
 
Publication Date*: 7/31/2012 Identification Number: 81 Mailto Link
Frequently Asked Questions
Is a company required to hold an annual shareholder meeting even if the only listed security is non-voting common stock?    
Identification Number
82
Yes. A company that lists only non-voting common stock on Nasdaq is required to hold an annual meeting.
 
Publication Date*: 7/31/2012 Identification Number: 82 Mailto Link
Frequently Asked Questions
When must a company hold its annual shareholder meeting?    
Identification Number
83
A company must hold its annual shareholder meeting no later than 12 months following the end of its fiscal year. Please note, however, that most companies hold their annual meeting within six months of their fiscal year end.
 
Publication Date*: 7/31/2012 Identification Number: 83 Mailto Link
Frequently Asked Questions
Can an annual shareholder meeting be held via the web?    
Identification Number
84
Nasdaq permits the use of webcasts instead of, or in addition to, a physical meeting, provided such webcasts are permissible under the relevant state law. It is important, however, that shareholders have the opportunity to ask questions of management.
 
Publication Date*: 7/31/2012 Identification Number: 84 Mailto Link
Frequently Asked Questions
When must a newly listed company hold its first annual meeting after listing?    
Identification Number
86
A newly listed company that was not previously subject to a requirement to hold an annual meeting is required to hold its first meeting within one year after its first fiscal year end following listing. This includes both initial public offerings and companies that are already public at the time of application to Nasdaq. Of course, Nasdaq's meeting requirement does not supplant any applicable state or federal securities laws concerning annual meetings.
 
Publication Date*: 7/31/2012 Identification Number: 86 Mailto Link
Frequently Asked Questions
What is the effect of a change in a company's fiscal year end on its annual shareholder meeting requirement?    
Identification Number
87
Whether an annual shareholder meeting is required when a company changes its fiscal year end depends on the treatment of the transition period under SEC Rules 13a-10 and 15d-10. In general, if the company files a transition report with audited financials for the new fiscal year end, it must hold an annual meeting for this transition period within one year of the transition period end date. Otherwise, the company need not hold a separate annual meeting for the transition period, but it should include the transition period in its next annual meeting.
 
Publication Date*: 7/31/2012 Identification Number: 87 Mailto Link
Frequently Asked Questions
How does the annual meeting requirement apply to a company following a business combination?    
Identification Number
88
When a Nasdaq company merges with another entity, and Listing Rule 5110(a), relating to business combinations, is applied, the surviving entity will be treated as a new listing. In this situation, the survivor is required to hold an annual meeting within one year after its first fiscal year end following its listing on Nasdaq.  
 
Publication Date*: 7/31/2012 Identification Number: 88 Mailto Link
Frequently Asked Questions
Can a company provide an information statement instead of a proxy statement in connection with its annual shareholder meeting?    
Identification Number
169
Yes.  A company may provide an information statement instead of a proxy statement in connection with its annual shareholder meeting, provided it is in full compliance with any applicable law, rule or regulation, including SEC regulations 14A and 14C. The company is still required to hold an annual meeting pursuant to Listing Rule 5620(a).
 
Publication Date*: 7/31/2012 Identification Number: 169 Mailto Link
Frequently Asked Questions
Does a company need to file a hard copy of its proxy statement with Nasdaq?    
Identification Number
170
A company that files proxy statements via EDGAR does not need to provide a hard copy to Nasdaq. A company that does not file via EDGAR must send a hard copy of its proxy statement to Listing Qualifications at continuedlisting@nasdaq.com.
 
Publication Date*: 7/31/2012 Identification Number: 170 Mailto Link
Frequently Asked Questions
Does Nasdaq permit the use of electronic media to solicit proxies?    
Identification Number
171
Yes.  A company can use electronic media to solicit proxies subject to the requirements of the SEC.
 
Publication Date*: 7/31/2012 Identification Number: 171 Mailto Link
Frequently Asked Questions
What is Nasdaq's minimum quorum requirement?    
Identification Number
172
Under Listing Rule 5620(c), each company must provide for a quorum as specified in its bylaws for any meeting of the holders of common stock; provided, however, that in no case can such quorum be less than 33 1/3 percent of the outstanding shares of the company's common voting stock.  
 
Publication Date*: 7/31/2012 Identification Number: 172 Mailto Link
Frequently Asked Questions
In the case of a company having multiple classes of voting common stock, should the quorum be based on the number of shares or the number of votes present?    
Identification Number
173
In the case of a company having multiple classes of voting common stock, Nasdaq will accept a quorum based on the presence of either a percentage of the outstanding shares or a percentage of the outstanding votes.
 
Publication Date*: 7/31/2012 Identification Number: 173 Mailto Link
Frequently Asked Questions
Is a company required to submit its audit committee charter to Nasdaq?
Identification Number
89
No. Nasdaq requires that a company make a one-time certification that it has an audit committee charter that satisfies Nasdaq's requirements as set forth in Listing Rule 5605(c)(1), but the company need not submit a copy of the charter to Nasdaq. Under Item 407(d)(1) of Regulation S-K, a company must disclose whether a current copy of its audit committee charter is available on the company’s website and if so, provide the website address. If not so available, the company should include the charter as an appendix to its proxy statement at least once every three years or in any year in which the charter has been materially amended. If the charter is not available on the company’s website and is not included as an appendix to the proxy statement filed by the company for that fiscal year, the company should disclose the year in which the charter was most recently included as an appendix to the company’s proxy statement.
 
Publication Date*: 7/31/2012 Identification Number: 89 Mailto Link
Frequently Asked Questions
Does a person who satisfies the SEC's requirement of an audit committee "financial expert" satisfy Nasdaq's "financial sophistication" requirement?
Identification Number
90
Yes. An individual who meets the requirements of the SEC's "financial expert" definition satisfies this requirement. Nasdaq rules require that a company have at least one member on the audit committee that has past employment experience in finance or accounting, requisite professional certification in accounting or any other comparable experience or background which results in the individual's financial sophistication, including being or having been a chief executive officer, chief financial officer or other senior officer with financial oversight responsibilities.
 
Publication Date*: 7/31/2012 Identification Number: 90 Mailto Link
Frequently Asked Questions
Must a company obtain approval from Nasdaq in order to utilize the exceptional and limited circumstances provision for its audit committee according to Listing Rule 5605(c)(2)(B)?    
Identification Number
91
No. A company may choose to rely on the exception without obtaining Nasdaq's approval. A company, other than a Foreign Private Issuer, that relies on this exception must comply with the disclosure requirements set forth in Item 407(d)(2) of Regulation S-K. A Foreign Private Issuer that relies on this exception must disclose in its next annual report (e.g., Form 20-F or 40-F) the nature of the relationship that makes the individual not independent and the reasons for the board's determination. A member appointed under this exception may not serve longer than two years and may not chair the audit committee.  
 
Publication Date*: 7/31/2012 Identification Number: 91 Mailto Link
Frequently Asked Questions
May a company rely on the exceptional and limited circumstances provision as set forth in Listing Rule 5605(c)(2)(B) if it has three or more independent directors on its audit committee?    
Identification Number
92
A company may use this provision to include a non-independent director on the audit committee even if there are already three or more independent directors on the audit committee, provided the individual meets the criteria for audit committee service under Section 10A(m)(3) under the Act and the rules thereunder and is not currently an Executive Officer or employee or a Family Member of an Executive Officer, and the company's board determines that membership on the audit committee by the individual is required by the best interests of the company and its shareholders. A company, other than a Foreign Private Issuer, that relies on this exception must comply with the disclosure requirements set forth in Item 407(d)(2) of Regulation S-K. A Foreign Private Issuer that relies on this exception must disclose in its next annual report (e.g., Form 20-F or 40-F) the nature of the relationship that makes the individual not independent and the reasons for the board's determination. A member appointed under this exception may not serve longer than two years and may not chair the audit committee.  
 
Publication Date*: 7/31/2012 Identification Number: 92 Mailto Link
Frequently Asked Questions
What happens if a company no longer complies with the audit committee composition requirement because an audit committee member resigns?
Identification Number
93
Pursuant to Listing Rule 5605(c)(4), if an audit committee member resigns and the company is not otherwise relying on a cure period for its audit committee membership, the company has until the earlier of the next annual shareholders meeting or one year from the date of resignation to replace the audit committee member; provided, however, that if the annual shareholders meeting occurs no later than 180 days following the resignation, the company shall instead have 180 days from such resignation to regain compliance. A company relying on this cure period must provide notice to Nasdaq immediately upon learning of the resignation.
 
Publication Date*: 7/31/2012 Identification Number: 93 Mailto Link
Frequently Asked Questions
What happens if a company no longer complies with the audit committee composition requirement because an audit committee member can no longer be considered independent?    
Identification Number
94
Pursuant to Listing Rule 5605(c)(4), if an audit committee member ceases to be independent for reasons outside the member's reasonable control, the audit committee member may remain on the audit committee until the earlier of the company's next annual meeting of shareholders or one year from the occurrence of the event that caused the failure to comply with this requirement. A company relying on this provision must provide notice to Nasdaq immediately upon learning of the event that caused the director to be considered non-independent.
 
Publication Date*: 7/31/2012 Identification Number: 94 Mailto Link
Frequently Asked Questions
A Nasdaq-listed company is a bank holding company. Can the company's audit committee include persons who are directors of the subsidiary operating bank, but who are not directors of the listed holding company?    
Identification Number
95
No. The members of the audit committee must be members of the board of the listed company, in this case, the holding company.  
 
Publication Date*: 7/31/2012 Identification Number: 95 Mailto Link
Frequently Asked Questions
For purposes of Listing Rule 5605(c)(2)(A), what does it mean to have "participated in the preparation of the financial statements" of the company?    
Identification Number
96
An individual will be considered to have participated in the preparation of the company's financial statements if the individual has played any role in compiling or reviewing those financial statements, including a supervisory role. An interim officer who signed or certified the company's financial statements will be deemed to have participated in the preparation of the company's financial statements and, therefore, could not serve on the audit committee for three years.  
 
Publication Date*: 7/31/2012 Identification Number: 96 Mailto Link
Frequently Asked Questions
What notification is required to be given to Nasdaq if a company no longer complies with the audit committee composition requirement of Listing Rule 5605(c)(2)(A)?    
Identification Number
97
Listing Rule 5625 states that a company must provide Nasdaq with prompt notification after an executive officer of the company becomes aware of any noncompliance by the company with the requirements of Listing Rule 5600 Series. Further, companies are required to notify Nasdaq if they are relying on the "Cure Periods" set forth in Listing Rule 5605(c)(4) to regain compliance with the independent director requirement.
 
In addition, the Listing Agreement requires that a company notify Nasdaq upon discovery of any event of noncompliance.
 
A company can provide the required notification to its Nasdaq Listing Qualifications analyst via email at continuedlisting@nasdaq.com.  
 
Publication Date*: 7/31/2012 Identification Number: 97 Mailto Link
Frequently Asked Questions
What types of companies are not required to comply with the compensation committee requirements?
Identification Number
1108
The following companies are not required to comply with the compensation committee requirements under Listing Rule 5605(d):
  • A controlled company is exempt from this rule, provided that the company discloses in its proxy statement that it is a controlled company and the basis for that determination;
  • A company listing in connection with its initial public offering is permitted to phase in compliance with the compensation committee composition requirements within one year of listing;
  • A foreign private issuer may elect to follow its home country practice in lieu of this requirement as long as it meets the disclosure requirements set forth in Listing Rule 5615(a)(3)(B);
  • Management investment companies registered under the Investment Company Act of 1940, asset-backed issuers, unit investment trusts, and cooperative entities, such as agricultural cooperatives, are not subject to this rule; and
  • A limited partnership is exempt from this rule.
In addition, a smaller reporting company is exempt from some, but not all, of the requirements. See Listing Rule 5605(d)(5).
 
Publication Date*: 1/3/2014 Identification Number: 1108 Mailto Link
Frequently Asked Questions
Must a business development company comply with the compensation committee requirements?
Identification Number
1107
Yes. Business development companies are required to comply with all of the provisions of the Rule 5600 Series, including the compensation committee requirements in Rule 5605(d) and IM 5605-6.
 
Publication Date*: 1/3/2014 Identification Number: 1107 Mailto Link
Frequently Asked Questions
Must a company establish a charter for its compensation committee?    
Identification Number
107
Each company must adopt a formal written compensation committee charter specifying the content set forth in Listing Rule 5605(d)(1). The compensation committee must review and reassess the adequacy of the charter on an annual basis.  
 
Publication Date*: 12/4/2014 Identification Number: 107 Mailto Link
Frequently Asked Questions
How many directors are required to serve on a compensation committee?    
Identification Number
104
Each company must have a compensation committee consisting of at least two members. However, for a company to be eligible to appoint a non-independent director under the exceptional and limited circumstances provision of Listing Rule 5605(d)(2)(B), the compensation committee must consist of at least three directors.
 
Publication Date*: 1/3/2014 Identification Number: 104 Mailto Link
Frequently Asked Questions
A company's board of directors consists of a majority of independent directors. May the whole board serve as a compensation committee?    
Identification Number
103
No. Listing Rule 5605(d)(2) and IM-5605-6 require the company to have a compensation committee consisting of at least two members. Each committee member must be an independent director as defined under Rule 5605(a)(2). In addition, in affirmatively determining the independence of any director who will serve on the compensation committee of a board of directors, the board of directors must consider all factors specifically relevant to determining whether a director has a relationship to the Company which is material to that director’s ability to be independent from management in connection with the duties of a compensation committee member, including, but not limited to:

(i) the source of compensation of such director, including any consulting, advisory or other compensatory fee paid by the Company to such director; and
(ii) whether such director is affiliated with the Company, a subsidiary of the Company or an affiliate of a subsidiary of the Company.

Publication Date*: 12/4/2014 Identification Number: 103 Mailto Link
Frequently Asked Questions
What is a Controlled Company?    
Identification Number
109
According to Listing Rule 5615(c) and IM-5615-5, a Controlled Company is a company of which more than 50% of the voting power for the election of directors is held by an individual, a group or another company. The calculation of voting power held by a group can include shares covered under voting agreements between or among shareholders relating to the election of directors. For a group to exist, the shareholders must have filed a notice that they are acting as a group (e.g., a Schedule 13D).
 
Publication Date*: 7/31/2012 Identification Number: 109 Mailto Link
Frequently Asked Questions
Are the independent directors at a Controlled Company required to hold executive sessions?    
Identification Number
131
Yes. Controlled Companies, while exempt from certain corporate governance rules requiring independent directors, are not exempt from the requirements pertaining to executive sessions of independent directors.
 
Publication Date*: 7/31/2012 Identification Number: 131 Mailto Link
Frequently Asked Questions
What exemptions to Nasdaq's corporate governance policies are provided to a Controlled Company?  
Identification Number
110
A Controlled Company is exempt from the majority independent board requirement, as set forth in Listing Rule 5615(b), except for the requirements of subsection (b)(2), which pertain to executive sessions of independent directors, and from the requirement for independent director oversight of executive officer compensation and director nominations, as set forth in Listing Rules 5605(d) and 5605(e).
 
A Controlled Company, other than a Foreign Private Issuer, relying upon such exemptions must comply with the disclosure requirements set forth in Instruction 1 to Item 407(a) of Regulation S-K. A Foreign Private Issuer is required to disclose in its annual report on Form 20-F or Form 40-F that it is a Controlled Company and the basis for that determination. Please see IM-5615-5, Controlled Company Exemption.
 
Publication Date*: 7/31/2012 Identification Number: 110 Mailto Link
Frequently Asked Questions
Does a company that is eligible to rely on the Controlled Company exemption have to disclose if it chooses not to rely on the exemption?    
Identification Number
111
No. A company only must disclose when it is relying on the Controlled Company exemption. A company eligible to rely on the exemption that does not choose to do so has no special disclosure obligations.
 
Publication Date*: 7/31/2012 Identification Number: 111 Mailto Link
Frequently Asked Questions
If a company ceases to be a Controlled Company, when must it comply with the corporate governance requirements?    
Identification Number
112
If a company ceases to be a Controlled Company, it is permitted to phase in its compliance with the independent committee requirements set forth in Listing Rule 5605(d) and (e) as follows: (1) one independent member at the time it ceases to be a controlled company; (2) a majority of independent members within 90 days; and (3) all independent members within one year of the time it ceases to be a controlled company. Furthermore, the company must comply with the majority independent board requirement in Listing Rule 5605(b) within twelve months of the date it ceases to be a controlled company. If a company previously indicated on its corporate governance certification that it was not subject to a requirement because it was a controlled company, that company must submit a new corporate governance certification form, which is accessible through the Company Event Notification Form in the Listing Center, if it ceases to be a controlled company.
 
A company that has ceased to be a Controlled Company must comply with the audit committee requirements of Listing Rule 5605(c) as of the date it ceased to be a Controlled Company. Furthermore, the executive sessions requirement of Listing Rule 5605(b)(2) applies to Controlled Companies as of the date of listing and continues to apply after it ceases to be controlled.
 
 
Publication Date*: 7/31/2012 Identification Number: 112 Mailto Link
Frequently Asked Questions
Does Nasdaq require notification when a company no longer complies with the corporate governance requirements as set forth in the Listing Rule 5600 Series?
Identification Number
113
Yes. As set forth in Listing Rule 5625, a company must provide Nasdaq with prompt notification after an executive officer of the company becomes aware of any noncompliance by the company with the requirements of the Listing Rule 5600 Series, which relates to corporate governance. As such, companies are required to notify Nasdaq if they are relying on the "Cure Periods" set forth in Listing Rule 5605(b)(1)(A) to regain compliance. The company should provide this notification to its Listing Qualifications Analyst via email at continuedlisting@nasdaq.com.
 
Publication Date*: 7/31/2012 Identification Number: 113 Mailto Link
Frequently Asked Questions
Under what circumstances is a cure period provided for corporate governance deficiencies?
Identification Number
114
If a company fails to comply with the independent audit committee or majority independent board requirement due to one vacancy, or because one director ceases to be independent due to circumstances beyond the director's reasonable control, the company is provided a cure period until the earlier of its next annual meeting or one year from the occurrence of the event that caused the failure to comply. However, a company is provided a 180 day cure period if the next annual meeting occurs less than 180 days after the event that caused the failure to comply.
 
Publication Date*: 7/31/2012 Identification Number: 114 Mailto Link
Frequently Asked Questions
Under what circumstances is a cure period not provided to remedy corporate governance deficiencies?    
Identification Number
115
As set forth in Listing Rule 5810(c)(2), a company is not provided a cure period and must provide a plan of compliance for violations of, among other things:
    • Majority independent board or audit committee composition requirements due to more than one vacancy on the board, or because more than one director ceases to be independent;
    • Code of Conduct;
    • Quorum;
    • Review of Related Party Transactions;
    • Shareholder Approval; and
    • Voting Rights.
The plan of compliance is due 45 days from the date that the company is notified. After reviewing the company's plan of compliance, Nasdaq may grant the company an extension of time, up to 180 calendar days from the date of the notification, to regain compliance. Note that, unlike the cure period under Listing Rule 5605, this 180 day extension is not automatic. Extensions of time may vary and are not granted in all cases.
 
Publication Date*: 7/31/2012 Identification Number: 115 Mailto Link
Frequently Asked Questions
What is the applicable cure period when a Company becomes non-compliant with the audit committee composition requirement because a director does not stand for re-election at the annual shareholders meeting?
Identification Number
1042
When a company becomes non-compliant with the audit committee composition requirement because of a vacancy created when a director does not stand for re-election, the company generally is afforded a cure period until the earlier of the company's next annual meeting or one year from the anniversary of the meeting causing non-compliance.  A company that finds itself in this situation must contact Listing Qualifications as soon as it is aware of the issue.
 
Publication Date*: 7/31/2012 Identification Number: 1042 Mailto Link
Frequently Asked Questions
How does Nasdaq define an "Independent Director"?
Identification Number
132
 
Publication Date*: 7/31/2012 Identification Number: 132 Mailto Link
Frequently Asked Questions
How does Nasdaq define a "Family Member"?
Identification Number
133
Listing Rule 5605(a)(2) defines "Family Member" as a person's spouse, parents, children and siblings, whether by blood, marriage or adoption, or anyone residing in such person's home. When applying the three-year look-back provisions in Listing Rule 5605(a)(2), a company does not have to consider a person who is no longer a Family Member as a result of legal separation, divorce, death, or incapacitation.
 
Publication Date*: 7/31/2012 Identification Number: 133 Mailto Link
Frequently Asked Questions
How does Nasdaq define "Executive Officer"?
Identification Number
134
Listing Rule 5605(a)(1) states that an "Executive Officer" means those officers covered in the Rule 16a-1(f) under the Securities and Exchange Act of 1934. Nasdaq applies this definition regardless of whether the entity in question is a public company. The term, "non-executive employee", means any employee that is not a Section 16 officer.  
 
Publication Date*: 7/31/2012 Identification Number: 134 Mailto Link
Frequently Asked Questions
How does Nasdaq define a "Parent or Subsidiary"?    
Identification Number
135
IM-5605 states that the reference to a "Parent or Subsidiary" is intended to cover entities the company controls and consolidates with the company's financial statements as filed with the SEC (but not if the company reflects such entity solely as an investment in its financial statements).
 
Publication Date*: 7/31/2012 Identification Number: 135 Mailto Link
Frequently Asked Questions
If an entity is acquired by, or merges with, a Nasdaq-listed company, may a former officer of the acquired entity be eligible to qualify as an independent director of the combined entity?    
Identification Number
137
Yes. A former officer of an entity acquired by a Nasdaq-listed company may qualify to be an independent director, provided that the former officer was not employed by the company following the completion of the acquisition.
 
Publication Date*: 7/31/2012 Identification Number: 137 Mailto Link
Frequently Asked Questions
How does Nasdaq apply the look back set forth in Listing Rule 5605(a)(2)(D)?    
Identification Number
138
Listing Rule 5605(a)(2)(D) precludes a director from being independent if the director is, or has a Family Member who is, a partner in, or a controlling shareholder or an executive officer of, any organization to which the company made, or from which the company received certain payments in the current or any of the past three fiscal years. If the director is currently a partner in, controlling shareholder of, or executive officer of an entity which has made or received such payments, then the individual is not eligible to be an independent director. However, if the director ceases to be associated with the entity, then the director is not precluded from being an independent director under this paragraph of the Rule.
 
Publication Date*: 7/31/2012 Identification Number: 138 Mailto Link
Frequently Asked Questions
Does an option awarded for consulting service contribute to the $120,000 limit in Listing Rule 5605(a)(2)?    
Identification Number
139
Yes. The option would have to be valued using a commonly accepted option pricing formula, such as the Black-Scholes or binomial model at the time of grant. This valuation is considered a payment upon grant even if the option does not immediately vest or if there are conditions to vesting or exercise.  
 
Publication Date*: 7/31/2012 Identification Number: 139 Mailto Link
Frequently Asked Questions
Do lawyers, whose firms provide services to the Nasdaq-listed company, fall under the $120,000 compensation test of Listing Rule 5605(a)(2)(B) or the 5%/$200,000 indirect payment test of Listing Rule 5605(a)(2)(D)?    
Identification Number
140
Payments from the Nasdaq-listed company to a law firm would generally be considered under Listing Rule 5605(a)(2)(D), which looks to whether the payment exceeds the greater of 5% of the recipient's gross revenues or $200,000. If the firm is a sole proprietorship, however, Listing Rule 5605(a)(2)(B), which looks to whether compensation exceeds $120,000, applies. For purposes of determining whether a lawyer is eligible to serve on an audit committee, SEC Rule 10A-3 generally provides that any partner in a law firm that receives payments from the issuer is ineligible to serve on that issuer's audit committee.  
 
Publication Date*: 7/31/2012 Identification Number: 140 Mailto Link
Frequently Asked Questions
Does Nasdaq have requirements for listed companies regarding the composition of the board of directors?    
Identification Number
143
Listing Rule 5605(b)(1) requires most Nasdaq-listed companies to have a majority of independent directors on the board of directors. A listed company, other than a Foreign Private Issuer, is required to comply with the disclosure requirements set forth in Item 407(a) of Regulation S-K. A Foreign Private Issuer is required to disclose in its annual report on Form 20-F or Form 40-F those directors that the company's board of directors has determined to be independent under Listing Rule 5605(a)(2). Please see IM-5605 Definition of Independence - Listing Rule 5605(a)(2) and IM-5605-1 Majority Independent Board.
 
Publication Date*: 7/31/2012 Identification Number: 143 Mailto Link
Frequently Asked Questions
Does Nasdaq have requirements for listed companies regarding the size of the board of directors?  
Identification Number
144
Yes.  Nasdaq-listed companies must have at least three directors on their board to comply with the audit committee requirements of Listing Rule 5605(c)(2).  
 
Publication Date*: 7/31/2012 Identification Number: 144 Mailto Link
Frequently Asked Questions
What types of companies are not required to have a majority independent board of directors?    
Identification Number
145
The following companies are not required to have a majority independent board of directors:
    • A Controlled Company is exempt from this Rule, provided that the company discloses in its proxy statement that it is a controlled company and the basis for that determination;
    • A company listing in connection with its initial public offering is permitted to phase in compliance with majority independent board requirement within one year of listing;
    • A Foreign Private Issuer may elect to follow its home country practice in lieu of this requirement. For additional information, see FAQs for Non-U.S. Companies; and
    • Management investment companies registered under the Investment Company Act of 1940, asset-backed issuers, unit investment trusts, and cooperative entities, such as agricultural cooperatives, are not subject to this Rule.  
Publication Date*: 7/31/2012 Identification Number: 145 Mailto Link
Frequently Asked Questions
Does Nasdaq have any restrictions on the number of boards on which a director may serve?    
Identification Number
146
No. Nasdaq does not have any restrictions on the number of boards on which a director may serve.
 
Publication Date*: 7/31/2012 Identification Number: 146 Mailto Link
material_search_footer*The Publication Date reflects the date of first inclusion in the Reference Library, which was launched on July 31, 2012, or a subsequent update to the material. Material may have been previously available on a different Nasdaq web site.
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