As we previously blogged, The Nasdaq Stock Market filed with the Securities and Exchange Commission an amendment to its shareholder vote rule, often referred to as the 20% rule. The amendment was recently approved by the Commission. The amendments eliminate “book value” in the determination of what constitutes a dilutive transaction. Shareholder approval is required in connection with a 20% issuance at a price less than the Minimum Price. A 20% issuance is a transaction other than a public offering that involves the sale, issuance or potential issuance of a listed company’s common stock (or securities convertible or exercisable for common stock) that alone or together with sales by certain control persons equal 20% or more of the common stock or 20% or more of the voting power outstanding before the issuance. The Minimum Price is a price that is the lower of the closing price immediately preceding the signing of the definitive agreement or the average closing price for the five trading days immediately preceding the signing of that agreement. While the amendment is limited and does not modify or affect other aspects of Rule 5635, which still requires shareholder approval in many instances, it is still helpful for listed companies.

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