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Frequently Asked Questions
Is shareholder approval required of an equity award to a new employee?    
Identification Number
247
Under Listing Rule 5635(c)(4) shareholder approval is not required of an issuance to a person not previously an employee or director of the company, or following a bonafide period of non-employment, as an inducement material to the individual's entering into employment with the company, provided that such an issuance is approved by the company's compensation committee or a majority of the company's independent directors.
 
Publication Date*: 7/31/2012 Identification Number: 247 Mailto Link
Frequently Asked Questions
How is the percentage of shares of common stock to be issued in a transaction calculated?    
Identification Number
182
The percentage of shares of common stock to be issued in a transaction is calculated using the following formula:
 
Maximum Potential Issuance of Shares of Common Stock
Pre-transaction Issued and Outstanding Shares of Common Stock
 
To correctly calculate the percentage of shares to be issued, the numerator of this equation must contain all securities initially issued or potentially issuable or potentially exercisable or convertible into shares or common stock as a result of the transaction (e.g., earn-out clauses, penalty provisions, equity compensation awards assumed or in assumed plans, etc.).
 
To correctly determine the denominator, the company should use only issued and outstanding shares. If the company has multiple classes of common stock, all shares should be added together. However, the denominator should not assume the conversion or exercise of any options, warrants or other convertible securities.
 
Publication Date*: 7/31/2012 Identification Number: 182 Mailto Link
Frequently Asked Questions
Does a sale of securities in a transaction (other than a public offering) at a discount to the market value to officers, directors, employees, or consultants require shareholder approval under Listing Rule 5635(c)?  
Identification Number
275
Yes. The issuance of common stock (or equivalents) or securities convertible into or exercisable for common stock to officers, directors, employees, or consultants at a price less than the market value of the stock is considered a form of "equity compensation" and requires shareholder approval unless the issuance is part of a public offering (as described in IM-5635-3). For this purpose, market value is the closing bid price immediately preceding the time the company enters into a binding agreement to issue the securities.
 
Issuances to an entity controlled by an officer, director, employee, or consultant of the listed company may also be considered equity compensation under certain circumstances, such as where the issuance would be accounted for under Generally Accepted Accounting Principles as equity compensation or result in the disclosure of compensation under the applicable provisions of Regulation S-K.
 
Note that this provision also applies to limited partnerships, which are required by Rule 5615(a)(4)(H) to obtain the same approval for equity compensation as would be required under Rule 5635(c) and IM-5635-1.
 
A company considering an issuance to an entity controlled by an officer, director, employee, or consultant is encouraged to contact its Listing Qualifications analyst by phone at +1 301 978 8008 to discuss the transaction prior to entering into a definitive agreement.
 
Publication Date*: 6/18/2013 Identification Number: 275 Mailto Link
Frequently Asked Questions
May a company adopt a plan without shareholder approval that would be used solely for inducement awards?    
Identification Number
259
Yes. A company may do so provided that all awards made under the plan meet the requirements of Listing Rule 5635(c) and IM-5635-1.
 
Publication Date*: 7/31/2012 Identification Number: 259 Mailto Link
Frequently Asked Questions
When should I fill out a Listing Application?  
Identification Number
40
A Listing Application must be completed by all companies that wish to initially list on Nasdaq or by a company that is already listed on Nasdaq but wishes to transfer between the Nasdaq Global Market and the Nasdaq Capital Market. A listed company should also complete and submit a listing application if it wishes to list a secondary security on Nasdaq.
 
Publication Date*: 7/31/2012 Identification Number: 40 Mailto Link
Frequently Asked Questions
For purpose of the required disclosure of inducement awards, what is meant by "promptly"?    
Identification Number
254
As a safe-harbor, Nasdaq will consider disclosures made within four business days after the award to have been made "promptly."
 
Publication Date*: 7/31/2012 Identification Number: 254 Mailto Link
Frequently Asked Questions
Where are the necessary listing forms and instructions to list on Nasdaq?  
Identification Number
332
Listing applications and related forms are available electronically through the Nasdaq Listing Center. Before completing your application electronically, please take a few minutes to review our Initial Listing Guide. Generally, the company will need to complete the Listing Application, Listing Agreement, Corporate Governance Certification Form and Logo Submission Form. If you are unfamiliar with the contents of the Listing Application and related forms, we recommend that you preview the forms prior to logging into the Listing Center. This will help you gather all the information you will need to complete the forms.  Questions regarding the listing process should be directed to Listing Qualifications Staff at +1 301 978 8008.
 
Publication Date*: 7/31/2012 Identification Number: 332 Mailto Link
Frequently Asked Questions
What factors does Nasdaq consider when determining whether to aggregate the shares issued in separate transactions for purposes of determining whether the threshold for shareholder approval has been triggered?    
Identification Number
283
In deciding whether to aggregate transactions to determine whether shareholder approval is required, Nasdaq will consider whether the company is engaging in a stand-alone transaction or a series of issuances.

In general, Nasdaq will consider the following factors in making this determination:
    • Timing of the issuances - Timing alone is not necessarily a determining factor, and there is no definitive time period as to whether transactions are aggregated. Generally, if there are no other linkage factors present, transactions more than six months apart would not be aggregated;
    • Initiation of the subsequent transaction or transactions - At the time of the first transaction, was the company already planning the subsequent transaction? Did it already expect that it would have to raise additional capital?;
    • Commonality of investors - Transactions with common investors are more likely to be aggregated. In addition, the time period over which transactions would be aggregated, may be extended when there are common investors;
    • Existence of any contingencies between the issuances or transactions - Are the sales contingent upon one another? For example, a company may be required to obtain an equity line of credit before completing a discounted private placement;
    • Commonality as to the use of the proceeds/Same plan of financing - Transactions may be aggregated if they are used for the same purpose or plan of financing; and
    • Timing of the board of directors approval.
When transactions are aggregated, the calculation total shares outstanding or total voting power outstanding is made based on the shares and votes outstanding prior to the closing of the first issuance.
 
Publication Date*: 7/31/2012 Identification Number: 283 Mailto Link
Frequently Asked Questions
Is the inducement exemption available to induce a member of the board of directors to enter into employment?    
Identification Number
248
No. Listing Rule 5635(c) provides that the exemption is available only for a "person not previously an employee or director."
 
Publication Date*: 7/31/2012 Identification Number: 248 Mailto Link
Frequently Asked Questions
May a company use a Form 8-K to disclose an inducement grant in lieu of a press release?    
Identification Number
257
No. If the company is relying on the exemption from shareholder approval contained in Listing Rule 5635(c)(4), the Rule specifically requires disclosure through a press release.  
 
Publication Date*: 7/31/2012 Identification Number: 257 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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