Does a sale of securities in a private placement at a discount to the market value to officers, directors, employees, or consultants require shareholder approval under Listing Rule 5635(c)?
Yes. The issuance of common stock or securities convertible into or exercisable for common stock by the company to its officers, directors, employees, or consultants, or an Affiliated Entity of such a person, in a private placement at a price less than the market value of the stock is considered a form of “equity compensation” and requires shareholder approval. For this purpose, market value is the closing bid price immediately preceding the time the company enters into a binding agreement to issue the securities. An Affiliated Entity is any entity where an officer, director, employee or consultant of the company: (i) is a partner, executive officer, or controlling shareholder, or (ii) would be the beneficial owner of or have a pecuniary interest in the securities issued by the company.
Related Questions
- Does a sale of securities in a private placement at a discount to the market value to officers, directors, employees, or consultants require shareholder approval under Listing Rule 5635(c)?
- Do NRIs need to route the sale of securities acquired through IPO/Private Placement through the designated bank branch for Portfolio Investment Scheme, if any?
- How is it determined whether securities that are convertible into or exercisable for common stock are issued at a discount to market value?
