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  Staff Interpretation Letter 2004-95
Identification Number 961
Rule 4350(i)(1)(C)(i):  Each issuer shall require shareholder approval … prior to the issuance of designated securities … in connection with the acquisition of the stock or assets of another company if: (i) any director, officer or substantial shareholder of the issuer has a 5% or greater interest (or such persons collectively have a 10% or greater interest), directly or indirectly, in the company or assets to be acquired or in the consideration to be paid in the transaction or series of related transactions and the present or potential issuance of common stock, or securities convertible into or exercisable for common stock, could result in an increase in outstanding common shares or voting power of 5% or more.
Relevant Facts:  A company proposes a transaction (the “Transaction”) involving an entity controlled by its chairman of the board (the “Entity”). The Entity beneficially owns more than 30% of the company’s outstanding common stock.  In the proposed transaction, the Entity would be merged into a newly formed subsidiary of the company.  In exchange, the company would issue the same number of shares of the company’s common stock to the shareholders of the Entity that the Entity now holds.  The shares currently held by the Entity would be distributed to the company and immediately cancelled.  As a result, there would be no change in the number of outstanding shares of the company.  The sole change would be that the shares of the company’s common stock that were held by the Entity would now be held directly by the Entity’s shareholders.
Issue:  Is shareholder approval for the Transaction required under NASDAQ’s rules?
Determination:  NASDAQ determined that the Transaction would not require shareholder approval under the Rule because it will not result in an increase of the number of outstanding common shares or voting power.
Publication Date*: 7/31/2012 Mailto Link Identification Number: 961
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