NASDAQ 20% Rule: Stockholder Approval Requirements for Securities Offerings
An overview of the so-called NASDAQ 20% rule requiring stockholder approval before a listed company can issue twenty percent or more of its outstanding common stock or voting power. This Note examines how to apply the rule, make calculations under the rule, claim an exception under the rule and structure transactions to avoid or defer stockholder approval. This Note also offers tips for working with NASDAQ to avoid unnecessary delays. This Note can be used by companies and practitioners before any issuance of common stock, other equity with voting rights or convertible securities and warrants. It is especially useful for smaller reporting companies, many of which are listed on NASDAQ and also for mid-cap and large-cap companies accepting large equity investments.