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1- 15 of 15
Search Results for:
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Ordering of Search Results
When searching across multiple libraries:
FAQs will appear in alphabetical order by category and sub-category
Listing Council Decisions will appear in reverse chronological order by year.
Staff Interpretations will appear in reverse chronological order by year
When searching using keywords:
Results are returned in order of term frequency (i.e., the number of times the keywords appear in the material).
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Libraries:
FAQs - Listings
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Filters:
Voting Rights; All
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Identification Number
292
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A Nasdaq-listed company may allow an investor to nominate or designate directors to its board. However, under Listing Rule 5640 (the Voting Rights Rule), the voting rights of existing shareholders cannot be disparately reduced through any corporate action. Thus, should a company allow an investor to nominate or designate directors at a level which is disproportionately greater than its ownership position, Nasdaq would view that corporate action as disparately reducing the voting power of the other shareholders.
The investor's ownership position should generally be consistent with the voting power held by the investor as a percentage of the overall votes entitled to be cast in the election of directors. For example, if the investor has a 30% ownership interest in the company, it could nominate or designate 30% of the members of the board. The number of directors can be rounded up to next whole number. However, rounding up would not be acceptable where the investor has less than a 50% ownership position but rounding up would allow the investor to nominate or designate a majority of the board. Please note that in evaluating voting power, Nasdaq will generally consider votes attributable to otherwise non-voting securities that are immediately convertible into voting securities at the investor's option, unless the investor must make additional payments to receive the voting security (such as with warrants).
The number of directors that can be nominated or designated is determined based on the ownership position at the time that the directors are initially appointed. Any agreement for the nomination or designation of directors must take into account subsequent reductions in the investor's voting power. As such, if the investor’s ownership position materially declines, whether through sales by the investor or additional issuances by the company, the investor's nomination or designation rights should be concomitantly reduced (this is sometimes called a "step-down"). In addition, the agreement with respect to directors should include a minimum level below which the investor would lose these rights. For example, Nasdaq has allowed agreements which provided that if the investor's ownership position were to fall below 5%, it would lose its director rights. Nasdaq would not require that a director be forced to resign intra-term as a result of a change to the investor's ownership.
In limited circumstances, such as when director rights derive from a substantial investment in the debt or non-voting securities of a troubled company, it may be appropriate to afford voting rights to the investor. In such cases, Nasdaq will generally evaluate such investments by comparing the amount of the investment to the company's market value.
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Publication Date*:
2/2/2016
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Identification Number:
292
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Identification Number
293
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No. Nasdaq does not distinguish between the right to designate members to the board and the right to nominate candidates.
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Publication Date*:
7/31/2012
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Identification Number:
293
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Identification Number
294
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No. The Voting Rights Rule applies only when the company specifically agrees with an investor to designate or nominate individuals outside of the nominations process and does not apply to the ordinary operations of the nominating committee.
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Publication Date*:
7/31/2012
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Identification Number:
294
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Identification Number
303
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Generally, the issuance of a second class of lower voting stock is permitted under Nasdaq's Voting Rights Rule. However, the higher voting class of security generally must not be eligible to convert into the lower-voting class, and the creation of the lower voting class cannot be accompanied by an exchange offer. This is because the public shareholders could potentially be disenfranchised if they convert to the lower voting class while the insiders retain the greater voting security.
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Publication Date*:
7/31/2012
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Identification Number:
303
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Identification Number
291
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Yes. Under the Nasdaq Voting Rights Policy set forth in IM-5640, companies with existing dual structures are generally permitted to issue additional shares of the existing class of higher voting stock in a capital-raising transaction, via a stock dividend, through the issuance of stock options, or in a stock split without conflict with the Voting Rights Policy.
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Publication Date*:
7/31/2012
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Identification Number:
291
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Identification Number
304
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Nasdaq may, in certain circumstances, accept an issuance of securities with heightened voting protection if the company is in financial distress. This policy is rooted in former SEC Rule 19c-4 and has continued under the uniform Voting Rights Rule and Policy which all listing markets have adopted. See Section III.B.6.c of SEC Release 34-25891, adopting former Rule 19c-4, and SEC Release No. 34-35121, which approved the adoption of the current uniform Voting Rights Rule and Policy.
In considering whether an issuance involving heightened voting protection is consistent with Nasdaq's Voting Rights Rule in the context of financial distress, Nasdaq will make the same assessment required under Listing Rule 5635(f), the financial viability exception to the shareholder approval rule.
Once financial distress is established, if a voting rights violation would otherwise be present, Nasdaq must consider whether the "proposed recapitalization is part of a plan to rescue the company" (SEC Rel. 34-25891), and as such, the voting rights are consistent with the new investors' reasonable expectations for protection of their investment. In that regard, "traditional varieties of preferred stock would be permitted under the policy. In contrast, blank check preferred stock with unlimited voting rights generally would be viewed as creating a new class of super voting rights, and impermissible under the policy." (SEC Rel. 34-35121) Preferred stock that votes on an as-converted basis may be permissible, if it would allow the preferred holders a voice concomitant with their potential, or as-converted, ownership stake. Likewise, the ability to nominate or appoint directors could also be reasonably designed to appropriately protect the new investors consistent with the Policy.
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Publication Date*:
7/31/2012
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Identification Number:
304
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Identification Number
289
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Yes. Under Listing Rule 5640, a company cannot disparately reduce or restrict existing shareholders' voting rights. Examples of such corporate action or issuance include the adoption of "time-phased" or "capped" voting rights plans, the creation of a new class of super-voting stock, or the issuance of stock with voting rights less than the per share voting rights of the existing common stock through an exchange offer.
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Publication Date*:
7/31/2012
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Identification Number:
289
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Identification Number
166
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In accordance with Listing Rule 5640 and IM-5640, Nasdaq will accept any action or issuance relating to the voting rights structure of a non-U.S. company that is either in compliance with the Nasdaq's requirements for domestic companies or that is not prohibited by the company's home country law.
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Publication Date*:
4/10/2023
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Identification Number:
166
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Identification Number
290
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The issuance of preferred stock that may convert at a discount to the Minimum Price of the common stock at the date of issuance and votes accordingly is a violation of the Nasdaq Voting Rights rule, since such preferred shares would have greater voting rights than the existing common shares. This potential problem can be addressed by limiting the voting power, such that the preferred shares would vote as if converted at the Minimum Price on the date of issuance.
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Publication Date*:
10/10/2018
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Identification Number:
290
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Identification Number
296
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Shareholders may not vote to disenfranchise themselves or to disparately reduce their voting rights. Thus, shareholder approval for the transaction that led to a violation of the voting rights rule will not remedy the violation.
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Publication Date*:
7/31/2012
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Identification Number:
296
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Identification Number
297
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Violation of the Nasdaq Voting Rights Rule and Policy could result in the company being delisted by Nasdaq and becoming ineligible to list on other markets. Accordingly, it is extremely important that Nasdaq-listed companies contemplating transactions, which may implicate the Rule and the Policy contact Nasdaq as early as possible. Copies of preliminary proxies or other material concerning matters that may implicate the Voting Rights Rule and Policy should be furnished to Nasdaq for review prior to formal filing, and companies may request a Staff Interpretative Letter with regard to whether a proposed transaction will be consistent with the Rule and Policy.
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Publication Date*:
7/31/2012
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Identification Number:
297
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Identification Number
298
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For an initial public offering, Nasdaq will generally accept any proposed voting structure. However, if a public company takes an action in contemplation of listing and such action would have been a violation of the Voting Rights Policy had the company already been listed, then the company's application may be denied. Based on Nasdaq's review of the voting structure and past corporate actions, Nasdaq may take any appropriate action including the denial of the application or the placing of restrictions on such qualification for listing. A company seeking listing of a security on Nasdaq should also disclose if it has requested a ruling or interpretation from another market regarding the application of that market's voting rights policy to the proposed transaction.
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Publication Date*:
7/31/2012
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Identification Number:
298
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Identification Number
300
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A "time-phased" voting plan restricts the voting power of shareholders based on the length of time the shares have been held. These plans usually involve a recapitalization in which all shareholders at the time of the recapitalization receive multiple votes per share for their holdings. Any investor that purchases stock subsequent to the commencement of the plan receives one vote per share unless and until that investor holds the stock for a stated period of time (usually three or four years). Nasdaq's voting rights rule ( Listing Rule 5640 and IM-5640) prohibits time-phased voting plans.
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Publication Date*:
7/31/2012
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Identification Number:
300
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Identification Number
301
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A "capped" voting plan limits a shareholder's voting power to a maximum amount, or cap, without regard to the total number of shares owned. Under a capped voting plan, shareholders who purchase shares in excess of the triggering amount are disenfranchised of their voting rights for the excess shares. As such, a capped voting plan restricts the per-share voting power of large shareholders and therefore is presumed to violate Nasdaq's voting rights rule.
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Publication Date*:
7/31/2012
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Identification Number:
301
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Identification Number
302
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Generally, the issuance of stock with disparate voting rights pursuant to an exchange offer is presumed to be prohibited under this Rule.
These recapitalizations are typically structured to provide a one-time opportunity to receive lower-voting stock in exchange for shares of the existing class of common stock. For example, a company will issue a new class of lower voting stock with a higher dividend, and make the existing voting stock convertible into the lower voting, high dividend stock. Shareholders then face the choice of surrendering their voting control and receiving a small economic benefit (the dividend sweetener), or bypassing the exchange offer and maintaining the greater voting rights. The exchange offer is considered coercive because it forces shareholders into a decision to disenfranchise themselves given the prospect that they will be left with neither the increased dividend nor a meaningful vote if they decide not to participate in the exchange offer. Accordingly, such exchange offers are presumed to be prohibited under Listing Rule 5640 and IM-5640.
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Publication Date*:
7/31/2012
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Identification Number:
302
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