The New York Stock Exchange has filed with the SEC a proposed rule filing to provide for temporary relief through June 30, 2020 from the application of certain shareholder approval requirements under Section 312.03 and 303A.08. The proposed rules would provide NYSE-listed companies that have been negatively impacted by COVID-19 and that would like to raise capital additional flexibility. Section 312.03(c) requires a NYSE-listed company that engages in a transaction other than a public offering for cash or a bona fide private financing meeting certain conditions to obtain shareholder approval prior to the issuance of common stock, or of securities convertible into or exercisable for common stock, that will have upon issuance, voting power equal to or in excess of 20% of the voting power outstanding before the issuance of such stock, or the number of shares of common stock to be issued is, or will be upon issuance, equal to or in excess of 20% of the number of shares of common stock outstanding before the issuance of the common stock.
The proposed Section 312.03T would be available where the delay in securing shareholder approval would have a material adverse impact on the company’s ability to maintain operations under its pre-COVID-19 business plan, result in workplace reductions, adversely impact the company’s ability to undertake new initiatives in response to COVID-19, or seriously jeopardize the financial viability of the enterprise. A listed company also would have to demonstrate that the need for the transaction is due to circumstances related to COVID-19, that the proceeds will not be used to fund an acquisition, and the company undertook a process designed to ensure that the proposed transaction represents the best terms available to the company. The audit committee, or another committee comprised solely of independent, disinterested directors, would have to expressly approve the company’s reliance on the exception and determine that the transaction is in the best interest of shareholders. A supplemental listing application would have to be submitted to the NYSE together with a certification relating to the satisfaction of the conditions for the temporary relief. The NYSE will review any application for reliance on the exception.
The issuer relying on the relief also would be required to make a public announcement on a Form 8-K no later than two business days before the issuance of the securities relating to the transaction, and disclosing the terms, that shareholder approval would ordinarily have been required, and that the audit or another independent committee had approved of the reliance on the exception.
The NYSE would also provide relief from Section 303A.08, which requires shareholder approval for certain sales to officers, directors, employees, or consultants when such issuances could be considered a form of equity compensation. Temporary relief would be provided for affiliate participation not exceeding certain de minimis thresholds.
The NYSE will aggregate issuances of securities in reliance on the temporary relief with subsequent issuances other than public offerings for cash at a discount to the minimum price if the definitive agreement relating to such issuances is executed within 90 days of the prior issuance.
The proposed rule filing is available here.
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