On March 20, 2019, the SEC approved changes to the NYSE's shareholder approval rule. The changes amend the price requirements that companies must meet to qualify for exceptions to the shareholder approval requirements under NYSE's rule 312.03(b) (related party issuances) and 312.03(c) (the 20% rule). The NYSE changes are comparable to changes made to Nasdaq's 20% shareholder approval rule in September 2018. Our prior post on the Nasdaq amendment can be found here.
The new rules replace the concept of “market value" with a “Minimum Price" for purposes of determining whether exceptions to the shareholder approval requirements apply. The Minimum Price is defined as the lower of (i) the official closing price on the NYSE as reported immediately preceding the signing of a binding agreement to issue securities, and (ii) the average of the official closing price for the five trading days immediately preceding the signing of a binding agreement to issue securities.
The NYSE amendment also eliminates the prior requirement that the price paid be no less than book value per share to qualify for the shareholder approval exceptions in Sections 312.03(b) and (c). The book value requirement has now been eliminated, leaving in place the requirement that price be at least equal to the Minimum Price. Note that all other requirements for shareholder approval under NYSE's rules remain unchanged.
A link to the NYSE rule 312.03 and 312.04 as amended can be found here.
A link to the SEC release approving the rule change can be found here.
A link to Nasdaq Rule 5635 as amended can be found here.
A special thank you to Blessing Havana and Eric Scarazzo in the New York office for their assistance with this post.