Abstract
PurposeTo explain a recent amendment by the US Securities and Exchange Commission (the SEC) to Nasdaq Rule 5635(d) (the 20 per cent Rule) to change the definition of “market value” for purposes of the 20 per cent Rule and eliminate the requirement for shareholder approval of certain private issuances at a price less than book value but greater than market value.Design/methodology/approachThis article provides background on the purpose and policy behind the 20 per cent Rule and summarizes the provisions of the 20 per cent rule, both before and after the recent SEC amendment thereto. This article then highlights the most important changes to the 20 per cent Rule and explains the implications thereof for Nasdaq-listed issuers.FindingsThe amended 20 per cent Rule provides Nasdaq-listed issuers greater flexibility in structuring transactions involving private placements of equity and will likely reduce the number of such transactions requiring a shareholder vote.Originality/valuePractical guidance from experienced corporate finance and capital markets lawyers.
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