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  Staff Interpretation Letter 2002-4
Identification Number 969
Rule 4350(a):  NASDAQ will provide exemptions to the extent that a rule requires any foreign issuer to do any act that is contrary to a law, rule or regulation of any public authority exercising jurisdiction over such issuer or the rule is contrary to generally accepted business practices in the issuer’s country of domicile.
Rule 4350(i)(1)(B):  Each issuer shall require shareholder approval prior to the issuance of designated securities … when the issuance or potential issuance will result in a change of control.
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 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 non-U.S. company has previously received the approval of its shareholders to issue shares in future private placements without further shareholder approval.  This prior approval was specific as to the maximum number of shares that could be issued, but was not specific as to the pricing or the identity of a purchaser.  The company now proposes to enter into a specific transaction that would result in both a change of control and the issuance of more than 20% of its pre-transaction outstanding shares at a discount. The number of shares that would be issued is less than the number previously approved by the shareholders.
Issue:  Does NASDAQ require shareholder approval for this transaction, given the prior approval by shareholders?
Determination:  Shareholder approval ordinarily would be required, pursuant to both Rules 4350(i)(1)(B) and 4350(i)(1)(D), because the company has not previously obtained approval for the specific transaction.  A more general authorization does not suffice unless the proposal contains parameters that are specific at least as to the maximum number of shares to be issued, the maximum dollar amount of the issuance, and the maximum discount to market.  Further, such a general authorization, even with these parameters, is not meant to permit the authorization of multiple transactions over an extended period of time.  Generally, a company may rely on such general authorization only for a transaction that closes within three months of the shareholder approval.
Issue:  Is the company eligible for an exemption from the shareholder approval rules?
Determination:  The company's foreign counsel represented that the laws, rules, and regulations of the home country do not require the company to obtain shareholder approval beyond that previously obtained, and that obtaining such approval is not consistent with the requirements of the primary stock market in the company's domicile.  Accordingly, counsel represented that in this instance, NASDAQ's shareholder approval requirements are contrary to generally accepted business requirements in the company’s home country.  Based on these representations, NASDAQ granted the requested exemptions to Rules 4350(i)(1)(B) and 4350(i)(1)(D).
Publication Date*: 7/31/2012 Mailto Link Identification Number: 969
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