NYSE MKT Corporate Governance Requirements

Posted by on July 16, 2016

A company seeking to list securities on NYSE MKT must meet minimum listing requirements, including specified financial, liquidity and corporate governance criteria. Today I am continuing my discussion regarding the corporate governance requirements. As a reminder, the NYSE categories of corporate governance include requirements related to the distribution of annual or interim reports; independent directors; audit committee; compensation of executive officers; nomination of directors; code of conduct; annual meetings; solicitation of proxies; quorum requirements; conflict of interest matters; shareholder approval requirements; and voting rights.

The NYSE MKT listed company is required to hold an annual meeting of shareholders no later than one year following its fiscal year end. The company is also required to solicit proxies for all shareholder meetings. The company must provide for a quorum of not less than 33 1/3% of the outstanding shares of its voting stock for any meeting of the shareholders. The NYSE MKT company must obtain shareholder approval of certain issuances of securities, including, (i) Acquisitions where the issuance equals 20% or more of the pre-transaction outstanding shares, or 5% or more of the pre-transaction outstanding shares when a related party has a 5% or greater interest in the acquisition target; (ii) issuances resulting in a change of control; (iii) equity compensation issuances; and (iv) Private placements where the issuance equals 20% or more of the pre-transaction outstanding shares at a price less than the greater of book or market value.

An NYSE MKT company must have governance procedures in place to monitor and address conflict of interest and related party transactions. The company must utilize its audit committee to review all related party transactions on an ongoing basis. An NYSE MKT company cannot take corporate actions or complete issuances of securities which will have the effect of disparately reducing or restricting the voting rights of existing shareholders.

Like NASDAQ, the NYSE MKT adopted the seasoning rules in late 2011 to limit companies from uplisting following the completion of a reverse merger with a US public shell. In a prior Lawcast I detailed the seasoning rules which in short prohibit an uplisting until after the reverse merged company has traded on the OTC Markets for a period of one year. The seasoning rule has an exemption for companies completing a firm commitment underwriting resulting in net proceeds to the company of $40 million. In the next Lawcast in this series I will discuss the NYSE MKT director independence requirements.