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Frequently Asked Questions
  Staff Interpretation Letter 2014-3
Identification Number 1129
This is in response to your correspondence regarding the applicability of the shareholder approval requirements of Listing Rule 5635(d)(2) (the “Rule”) to a proposed transaction that would be agreed to immediately before the Company’s listing but completed following the listing.
 
According to the information you provided, the Company is currently a wholly-owned subsidiary of a public company (the “Parent”). The Parent intends to separate the Company by distributing the Company’s common stock to the holders of the Parent’s common stock (the “Spinoff”). In the Spinoff, each holder of the Parent’s common stock would be entitled to receive a set number of shares of the Company’s common stock for each share of the Parent’s common stock held by such holder on the record date. Shares of the Company’s common stock are expected to begin trading on Nasdaq on a “when issued” basis on or shortly before the record date and “regular way” on the day the Company’s shares are distributed to the Parent’s shareholders. Parent will remain a separately traded public company.
 
The Company may pursue a private placement of shares of the Company’s common stock or securities convertible into or exercisable for the Company’s common stock (the “Transaction”). The definitive agreement for the purchase and sale of such securities would be executed prior to the distribution date of the Spinoff. At the time such definitive agreement is executed, the Parent, as the sole shareholder of the Company, would approve the terms of the Transaction. However, the Transaction would not be consummated, and the securities would not be issued, until after the distribution date of the Spinoff. The Transaction may result in the issuance of more than 20% of the Company’s common stock or voting power outstanding before the issuance. The issuance may be for less than the greater of book or market value of the shares of the Company’s common stock.
 
Following our review of the information you provided, we have determined that if the Transaction results in the potential issuance, at a price less than the greater of book or market value, of shares equal to 20% or more of the common stock or voting power outstanding before the issuance, then the Rule would require shareholder approval of the Transaction because the Company will be listed on Nasdaq at the time of the issuance. However, approval of the Transaction by the Parent prior to the distribution date of the Spinoff, as the sole shareholder of the Company, would satisfy this requirement.
 
Publication Date*: 10/7/2014 Mailto Link Identification Number: 1129
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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