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Frequently Asked Questions
  Staff Interpretation Letter 2003-46  
Identification Number 1013

Rule 4350(a): NASDAQ shall have the ability to provide exemptions from Rule 4350 to a foreign private issuer when provisions of this Rule are contrary to a law, rule or regulation of any public authority exercising jurisdiction over such issuer or contrary to generally accepted business practices in the issuer’s country of domicile.

Rule 4350(i)(1)(D)(ii): Each issuer shall require shareholder approval prior to the issuance of designated securities … in connection with a transaction other than a public offering involving the sale, issuance or potential issuance by the company of common stock (or securities convertible into or exercisable [for] common stock) equal to 20% or more of the common stock or 20% or more of the voting power outstanding before the issuance for less than the greater of book or market value of the stock.

Relevant Facts: A Canadian company intends to initiate a private placement of “Special Warrants”. Assuming the offering is fully subscribed, the company intends to first issue securities representing 25% of its outstanding common shares. In order to comply with the rules of the company’s home exchange, the balance of the offering will be issued upon receipt of shareholder approval. The maximum number of shares to be issued in the Special Warrant Transaction is approximately 40% of the company’s pre-transaction common shares outstanding. The issuance would be at a price less than the greater of book or market value of the company’s common stock.

Pursuant to Rule 4350(i)(1)(D)(ii), NASDAQ would require shareholder approval for the proposed issuance because the transaction would exceed 20% of both the common stock and voting power outstanding at a discount to the market price on a pre-transaction basis. Accordingly, the company requests an exemption from NASDAQ’s shareholder approval requirement based on Rule 4350(a).

Issue: Is the company eligible for an exemption from NASDAQ’s shareholder approval rules?

Determination: Yes. The company's home country counsel represented that the company is not required to obtain shareholder approval pursuant to either of: (i) Canadian Securities Laws; or (ii) the rules and policies of the Toronto Stock Exchange (“TSE”). The company also provided written confirmation from the TSE that it had accepted the company’s notice of the private placement and had granted conditional listing of the additional common shares. In determining generally accepted business practices in a foreign private issuer’s country of domicile, NASDAQ may look to the home country marketplace. In this case, the TSE does not impose the shareholder approval requirement set forth in Rule 4350(i)(1)(D)(ii). Further, the company’s home country counsel represented that it would be contrary to generally accepted business practices for a Canadian company to seek approval from its shareholders for the transaction, where such approval is not otherwise required. Accordingly, based on the representations made, NASDAQ determined to grant the requested exemption to Rule 4350(i)(1)(D)(ii).

Publication Date*: 7/31/2012 Mailto Link Identification Number: 1013
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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