On 20 March 2019, the SEC approved amendments to Sections 312.03 and 312.04 of the NYSE's Listed Company Manual, which are the rules setting out when a NYSE-listed company must seek shareholder approval before issuing securities.

Under existing NYSE rules, shareholder approval is required for share issuances to related parties exceeding 1% of outstanding shares (by number or voting power) and otherwise for share issuances exceeding 20% of outstanding shares (by number or voting power). There is an exception to this rule where the issuance relates to a sale of common stock, for cash, at a price at least as great as (i) the market value and (ii) the book value of the common stock of the company. Prior to the rule change, "market value" was defined as the official closing price on the NYSE as reported to the 'Consolidated Tape' immediately preceding the entering into of a binding agreement to issue the securities.

Under the amended rules, the concept of "market value" is replaced with a "minimum price" for purposes of determining whether the exception to the shareholder approval requirement applies. "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 prior to the signing of a binding agreement to issue securities.

The rule change also eliminates the book value prong of the exception.

The amendments are intended to simplify the shareholder approval requirements and provide NYSE-listed companies with more flexibility to negotiate and price an offering.

As with most of the NYSE corporate governance standards, foreign private issuers may opt to follow their home country practice in lieu of the NYSE rules. However, such companies must disclose non-compliance in their annual report on Form 20-F and in their annual written affirmation to the NYSE.

The amended rule is available here.

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