Does NASDAQ allow any exceptions to the Voting Rights Rule for financially distressed companies?
NASDAQ may, in certain circumstances, accept an issuance of securities with heightened voting protection if the company is in financial distress. This policy is rooted in former SEC Rule 19c-4 and has continued under the uniform Voting Rights Rule and Policy. See Section III.B.6.c of SEC Release 34-25891, adopting former Rule 19c-4, and SEC Release No. 34-35121, which approved the adoption of the current universal voting rights rule and policy. In considering whether an issuance involving heightened voting protection is consistent with the NASDAQ’s Voting Rights Rule in the context of financial distress, NASDAQ will make the same assessment required under Listing Rule 5635(f), the financial viability exception to the shareholder approval rule. Once financial distress is established, if a voting rights violation would otherwise be present, NASDAQ must consider whether the “proposed recapitalization is part of a plan to rescue the company” (SEC Rel. 34-25891), and as such, the voting rig
