NASDAQ Provides Temporary COVID-19 Exception From Shareholder Approval Requirements Under 20% Rule

Sullivan & Cromwell LLP - May 11, 2020

In light of the impact of the COVID-19 pandemic, The Nasdaq Stock Market LLC (“Nasdaq”) filed notice of a proposed rule change on May 4 with the Securities and Exchange Commission (“SEC”), which became effective immediately.   Specifically, Listing Rule 5636T (the “Temporary Rule”) provides a limited temporary exception to the shareholder approval requirements in Listing Rule 5635(d)—also known as the “20% Rule”—and a limited attendant exception for Listing Rule 5635(c) (Equity Compensation).   Any securities issued in reliance on the exception must be issued by the later of June 30, 2020 and 30 calendar days following the date of the binding agreement governing the issuance, in each case, after the company has submitted a certification of its compliance with the requirements of the Temporary Rule to Nasdaq by the earlier of June 30, 2020 and two business days before the issuance of the securities.  The SEC is soliciting comments on the Temporary Rule for 21 days following publication in the Federal Register.