On April 6, 2020, the Securities and Exchange Commission (“SEC”) approved, with immediate effectiveness, the proposal filed by the New York Stock Exchange (“NYSE”) with the Commission on April 3, 2020 to waive certain shareholder approval requirements set forth in Section 312.03 of the NYSE Listed Company Manual through June 30, 2020.
As we previously blogged, Section 312.03 requires listed companies to obtain shareholder approval prior to issuances to directors, officers, substantial shareholders or their respective affiliates (“Related Parties”) if the number of shares of common stock (or common stock equivalents) to be issued exceeds 1% of the number or voting power of outstanding shares before the issuance. In the case of a substantial shareholder that is not a director or officer, shareholder approval is required if the number of securities or the voting power exceeds 5% of the pre-transaction shares or voting power outstanding and the securities are issued at a price that is lower than the minimum price (defined as the preceding day’s closing price or an average of the closing prices during the preceding five trading days). In order to qualify for the waiver, the proposed transaction must be reviewed and approved by the company’s audit committee. As a result, NYSE-listed companies are now temporarily permitted to sell securities to Related Parties without complying with the numerical limitations of the current rule, as long as the sale is for cash and in a transaction that meets the NYSE’s minimum price requirement.
Similarly, for purposes of the bona fide financing exception to the NYSE’s 20% requirement, the SEC approved the NYSE’s proposal to temporarily waive the 5% limitation for any sale to an individual investor in a bona fide private financing, which is the exception generally relied upon for Rule 144A offerings. This waiver allows a private placement transaction to proceed without shareholder approval regardless of its size or the number of participating investors or the amount of securities purchased by any single investor so long as the transaction is a sale of the company’s securities for cash at a price that meets the minimum price requirement.
Here is the link to the SEC’s approval, https://www.sec.gov/rules/sro/nyse/2020/34-88572.pdf.