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NYSE Again Extends Temporary Waivers of Shareholder Approval Requirements for Related-Party and 20% Equity Issuances

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On September 28, 2020, the New York Stock Exchange (the “NYSE”) and the Securities and Exchange Commission further extended the temporary waiver to the NYSE shareholder approval requirements for certain related party and 20% equity issuances listed in Section 312.03 of the NYSE Listed Company Manual. The relief contained in the waiver (originally granted in April 2020) was originally set to expire on June 30, 2020, was subsequently extended to September 30, 2020, and now has been further extended through December 31, 2020. The NYSE extended the waiver due to the ongoing economic disruption and uncertainty some listed companies continue to face as a result of the COVID-19 pandemic. Despite the fact that equity indices have recovered from much of their precipitous decline in mid-March, the SEC noted that many companies continue to experience difficulty accessing the public capital markets.


The waiver temporarily expands the exceptions to the shareholder vote requirements under Section 312.03(b) of the NYSE Listed Company Manual to permit certain issuances to a “Related Party” or any issuance to 5% shareholders of more than 5% of the outstanding stock, as long as each such issuance involves a transaction for cash at a price that is greater than or equal to the Minimum Price.1


The temporary waiver also has the effect of permitting an investment by a single investor who may acquire more than 5% of the outstanding shares in a 20% Issuance under Section 312.03(c), as long as the price in such transaction is at or above the Minimum Price.


To qualify for either waiver involving a transaction that involves a Related Party or an affiliate of a Related Party, a transaction must be reviewed and approved by the company’s audit committee or a comparable committee comprised solely of independent directors. Further, any transaction benefitting from either of the waivers will still be subject to shareholder approval if required under any other applicable rule.


For a full summary of the waiver and the conditions for its use, please refer to our May alert.


The NYSE noted that since the implementation of the waiver, a number of listed companies have completed capital raising transactions that would not have been possible without the waiver. Further, in proposing the initial relief and the extension, the NYSE noted that the expanded exceptions provide listed companies with temporary flexibility to consummate transactions which would not require approval under the applicable NASDAQ Stock Market Rules.


1Minimum Price is defined in the NYSE Listed Company Manual as the lower of: (i) the official closing price of the issuer’s stock on the Exchange as reported to the Consolidated Tape immediately preceding the signing of a binding agreement to issue the securities; or (ii) the average official closing price for the five trading days immediately preceding the signing of the binding agreement.

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