& Securities

The Securities Exchange Commission (the “SEC”) recently issued an order approving Nasdaq’s proposed rule changes amending Rules 5605, 5615 and 5810 to clarify and modify phase-in schedules and cure periods for certain independent director and board committee corporate governance requirements. We have updated our Requirements for Public Company Boards Including IPO Transition Rules guide here to reflect these changes.

The amended rules primarily:

• Modify phase-in schedules for board and for audit, compensation and nominating committee independence for companies listing in connection with an IPO, upon emergence from bankruptcy and upon transferring exchanges, as applicable;
• Provide for transition rules for companies listing in connection with a carve-out or spin-off transactions and companies ceasing to qualify as a foreign private issuer;
• Clarify transition rules for companies ceasing to qualify as a controlled company; and
• Specify cure periods in connection with new transition rules and for companies failing to meet compensation committee composition requirements.

The Nasdaq rule changes generally align the Nasdaq governance requirements phase-in timeline with the applicable New York Stock Exchange and SEC rules. The rule changes have been reflected in the Nasdaq Rulebook (here).

Companies considering listing on Nasdaq by way of IPO, emergence from bankruptcy, listing transfer, merger or other transaction should review their current and intended board and committee composition and confirm targeted dates for meeting Nasdaq requirements. Companies currently taking advantage of transition rules should identify board and committee candidates sufficiently in advance to ensure compliance with the phase-in rules.  Failure to comply requires disclosure pursuant to Item 3.01 of Form 8-K.