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MONTH-IN-BRIEF (Apr 2021)

Securities Regulation

NYSE Rule Amendments

By Madeline A. Moore, K&L Gates LLP

On April 2, 2021, the Securities and Exchange Commission (SEC) approved a proposed rule change filed by the New York Stock Exchange (NYSE) to amend certain of the shareholder approval requirements and the requirements for related party transactions in the NYSE Listed Company Manual (the “Amendments”).  The Amendments are intended to align the NYSE's shareholder approval requirements more closely with the requirements of the Nasdaq Stock Market and the NYSE American.

Prior to the Amendments, Section 312.03(b) generally required shareholder approval prior to certain issuances of common stock to “related parties.” Section 312.03(b) was amended to:

  • Require prior shareholder approval for certain issuances of common stock to directors, officers, and substantial security holders of the company (each, a “Related Party”).
  • No longer require shareholder approval for issuances to Related Parties’ subsidiaries, affiliates or other closely related persons or to any companies or entities in which a Related Party has a substantial interest (except where a Related Party has a 5% or greater interest in the counterparty).
  • Require shareholder approval of cash sales to Related Parties only if the price is less than the minimum price (as defined in Section 312.04 of the NYSE Listed Company Manual).
  • Require shareholder approval for an issuance of common stock or securities convertible into or exercisable for common stock where such securities are issued as consideration in a transaction or series of related transactions in which any Related Party has a 5% or greater interest (or such persons collectively have a 10% or greater interest), directly or indirectly, in the company or assets to be acquired or in the consideration to be paid in the transaction and the present or potential issuance of common stock, or securities convertible into common stock, could result in an increase in outstanding shares of common stock of 5% or more, or where otherwise required under NYSE rules.
  • Delete two now irrelevant provisions: (1) the exemption for cash sales meeting the minimum price and relating to 5% or less of shares of common stock or voting power; and (2) the early stage company exemption. The Amendments also remove the reference to the early stage company exemption from Section 312.04.

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