On February 12, 2016, the SEC approved a NASDAQ proposed rule change to provide the staff of NASDAQ's Listing Qualifications Department (Staff) with limited discretion to grant a listed company that fails to hold its annual meeting of shareholders an extension of time to comply with the requirement. The rule change applies to all listed companies, including limited partnerships.

The rule change amends NASDAQ Rules 5810(4), 5810(c), 5815(c), and 5820(d) to provide listed companies that fail to hold a timely annual meeting with the ability to submit a plan of compliance for the Staff's review. Until now, if a listed company failed to hold its annual meeting within one year after the end of its fiscal year, as required by NASDAQ Rule 5620, the Staff had no discretion to provide the company a cure period to regain compliance. Instead, Rule 5810(c)(1) required the Staff to issue a delisting determination, which subjects the company to immediate suspension and delisting unless the company appeals to a NASDAQ Hearings Panel.

The rule change notes that the only other instances where a company is subject to immediate suspension and delisting is when a company fails to timely solicit proxies and when the Staff determines that the company's continued listing raises a public concern. For all other deficiencies under the NASDAQ Listing Rules, a listed company is provided with either a fixed compliance period within which to regain compliance or the opportunity to submit a plan to regain compliance, which the Staff reviews and can allow the company additional time to implement. The rule change is intended to provide consistency with the administration of other continued listing standards where companies are provided a cure period or opportunity to submit a plan to regain compliance after they become deficient.

Under the rule change, following receipt of a deficiency notice from the Staff, a company will have 45 calendar days to submit a plan to regain compliance. A non-compliant company will also be required to publicly disclose, under both SEC and NASDAQ rules, that it has received a notification of non-compliance with the annual meeting requirement. After reviewing the compliance plan, the Staff will have discretion to grant an extension of up to 180 days from the deadline to hold the annual meeting.

In determining whether to grant a company an extension to comply with the annual meeting requirement, the Staff will consider:

The rule change also limits the maximum length of an extension that a NASDAQ Hearings Panel or the NASDAQ Listing and Hearing Review Council may grant for an annual meeting deficiency to no more than 360 calendar days from the date of non-compliance with the rule.

In addition, the rule change notes that a company that is not subject to NASDAQ's all-inclusive annual listing fee will be required to pay a $5,000 fee for the review of its compliance plan. Effective January 2018, all companies will be subject to the all-inclusive annual listing fee and the additional $5,000 fee will no longer apply to any company at that time. All companies, regardless of whether they participate in the all-inclusive annual fee program, are currently subject to a $10,000 fee for each of a panel hearing and an appeal to the NASDAQ Listing and Hearing Review Council. For more on NASDAQ's all-inclusive annual listing fee, see NASDAQ All-Inclusive Annual Listing Fee: Chart.

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