Nasdaq Continued Listing Requirements

Strategic legal guidance on Nasdaq continued listing standards. Anthony, Linder & Cacomanolis provides a detailed breakdown of quantitative requirements for the Capital, Global, and Global Select Markets, including bid price, equity thresholds, and qualitative governance rules like clawbacks and voting rights.

Nasdaq Continued Listing Requirements: Maintaining Market Eligibility

Achieving an initial listing on the Nasdaq Stock Market is a significant milestone, but it is only the beginning of a company’s life as a national exchange-listed issuer. To maintain the prestige and liquidity of a Nasdaq listing, companies must satisfy ongoing quantitative and qualitative standards. Anthony, Linder & Cacomanolis provides sophisticated counsel to boards and management teams to facilitate ongoing compliance with Nasdaq’s rules, ensuring that deficiency notices are addressed with strategic precision.

Nasdaq Capital Market Continued Listing Requirements

The Nasdaq Capital Market (NCM) is designed for emerging growth companies. Pursuant to Rule 5550, an issuer must satisfy all requirements in the “Core Standards” category and at least one of the requirements in the “Financial Standards” category.

Nasdaq Capital Market Quantitative Standards (Rule 5550)

Requirement	Core Standard
Minimum Bid Price	$1.00
Publicly Held Shares	500,000
Market Value of Publicly Held Shares	$1 Million
Round Lot Shareholders	300
Registered and Active Market Makers	2

 

Requirement	Financial Standard (Must Meet One)
Stockholders’ Equity	$2.5 Million
Market Value of Listed Securities	$35 Million
Net Income from Continuing Operations	$500,000 (most recent FY or 2 of 3 last FYs)

Nasdaq Global Market Continued Listing Requirements

The Nasdaq Global Market (NGM) carries higher entry and maintenance thresholds than the Capital Market. Pursuant to Rule 5450, a company must continue to meet at least one of the three financial standards listed below, in addition to the core liquidity standards.

Nasdaq Global Market Quantitative Standards (Rule 5450)

Requirement	Standard 1: Equity	Standard 2: Market Value	Standard 3: Total Assets/Revenue
Stockholders’ Equity	$10 Million	N/A	N/A
Market Value of Listed Securities	N/A	$50 Million	N/A
Total Assets	N/A	N/A	$50 Million
Total Revenue	N/A	N/A	$50 Million
Minimum Bid Price	$1.00	$1.00	$1.00
Publicly Held Shares	1.1 Million	1.1 Million	1.1 Million
MV of Publicly Held Shares	$5 Million	$15 Million	$15 Million
Round Lot Shareholders	400	400	400
Registered Market Makers	2	2	4

Nasdaq Global Select Market Continued Listing Requirements

The Nasdaq Global Select Market (NGS) represents the highest tier of the exchange. While initial listing requirements for Global Select are the most rigorous in the world, the continued listing standards for NGS are identical to those of the Nasdaq Global Market. Consequently, an NGS-listed company must satisfy the requirements set forth in Rule 5450 as detailed in the chart above to maintain its eligibility.

Qualitative Requirements and Corporate Governance

Beyond numerical thresholds, Nasdaq-listed companies must adhere to a comprehensive suite of qualitative standards designed to protect investor interests and ensure board accountability. These requirements are primarily codified in the Rule 5600 Series.

Board Composition and Independence (Rule 5605)

• Majority Independent Board: Pursuant to Rule 5605(b)(1), a majority of the board of directors must be independent as defined under Rule 5605(a)(2).
• Executive Sessions: Independent directors must have regularly scheduled executive sessions at which only independent directors are present, typically occurring at least twice a year, as required by Rule 5605(b)(2).

Committee Mandates and Structure

• Audit Committee (Rule 5605(c)): Every issuer must have an audit committee of at least three members, all of whom must be independent. Members must meet the criteria for independence set forth in Rule 10A-3(b)(1) under the Exchange Act and must be able to read and understand fundamental financial statements at the time of appointment. At least one member must have past employment experience in finance or accounting or other comparable experience resulting in financial sophistication.
• Compensation Committee (Rule 5605(d)): Issuers must have a compensation committee consisting of at least two independent directors. The committee must have a formal written charter and must satisfy enhanced independence requirements related to director compensation and affiliations.
• Nominating Committee (Rule 5605(e)): Director nominees must be selected, or recommended for the board’s selection, either by a nominating committee comprised solely of independent directors or by a majority of the independent directors in a vote in which only independent directors participate.

Recovery of Erroneously Awarded Compensation (Rule 5608)

The SEC’s adoption of Rule 10D-1 mandated that national exchanges implement “Clawback” rules. Pursuant to Nasdaq Rule 5608, every listed issuer must:

• Adopt a Written Policy: Maintain a written policy providing for the recovery of erroneously awarded incentive-based compensation received by current or former executive officers.
• Triggering Events: The policy must be triggered in the event the issuer is required to prepare an accounting restatement due to material non-compliance with any financial reporting requirement under the securities laws.
• Mandatory Recovery: The issuer must recover the amount of incentive-based compensation that exceeds the amount that otherwise would have been received had it been determined based on the restated amounts, without regard to any taxes paid.

Voting Rights (Rule 5640)

Nasdaq maintains a strict policy to prevent the disparate reduction of shareholder rights. Pursuant to Rule 5640:

• Restriction on Disparate Action: Voting rights of existing shareholders of publicly traded common stock cannot be disparately reduced or restricted through any corporate action or issuance.
• Examples of Prohibited Actions: This includes the adoption of a new class of stock with superior voting rights or the issuance of stock with a “time-phased” voting structure that favors certain holders.
• Grandfathering: While Nasdaq allows the listing of companies with existing dual-class structures at the time of an initial public offering, Rule 5640 prohibits a listed company from taking actions that strip voting power from its current public shareholders.

Conduct and Shareholder Engagement

• Code of Conduct (Rule 5610): All issuers must adopt and disclose a code of conduct applicable to all directors, officers, and employees. Any waivers of the code for directors or executive officers must be approved by the board and disclosed within four business days.
• Meetings of Shareholders (Rule 5620): Issuers must hold an annual meeting of shareholders no later than one year after the end of the fiscal year and must provide notice of such meeting to Nasdaq.
• Quorum (Rule 5620(c)): Each issuer must provide for a quorum as specified in its bylaws for any meeting of the holders of common stock, which shall in no case be less than 33 1/3 percent of the outstanding shares of the company’s common voting stock.

Review of Related Party Transactions (Rule 5630)

• Board Approval: Each issuer must conduct an appropriate review and oversight of all related party transactions for potential conflict of interest situations on an ongoing basis. All such transactions must be approved by the issuer’s audit committee or another independent body of the board of directors.

The Compliance Process: Deficiencies and Grace Periods

When a company falls below a continued listing threshold, Nasdaq’s Listing Qualifications Department typically issues a notice of deficiency. The process and potential grace periods vary depending on the type of deficiency:

• Bid Price and Market Value Deficiencies: Companies are typically provided a 180-calendar day grace period to regain compliance. For bid price, compliance is generally regained by maintaining a closing bid price of at least $1.00 for a minimum of ten consecutive business days.
• Financial and Governance Deficiencies: Companies are usually given 45 calendar days to submit a plan to regain compliance. If the plan is accepted, Nasdaq may grant an extension of up to 180 calendar days from the date of the deficiency notice.
• Filing Deficiencies: Failure to file periodic reports (Forms 10-K, 20-F, or 10-Q) triggers an immediate deficiency notice. Companies are generally granted 60 calendar days to submit a plan to regain compliance, with the possibility of an extension up to 180 days.

Authority Through Technical Depth

Our expertise in navigating the complexities of Nasdaq’s listing standards is grounded in years of professional advocacy before the Listing Qualifications Department and the Hearings Panel. We invite executive leadership to explore our extensive library of insights at our corporate website and our specialized blog site, www.securitieslawblog.com, for detailed analysis of the delisting process and reverse stock split strategies to cure bid price deficiencies.

Schedule an Executive Strategy Consultation

Maintaining a national exchange listing requires proactive governance and a deep understanding of Nasdaq’s regulatory framework. Anthony, Linder & Cacomanolis invites you to engage in a high-level strategy consultation to evaluate your current listing status and discuss strategies for long-term compliance.

Schedule an executive strategy consultation with our senior partners to discuss your Nasdaq listing needs by calling 877-541-3263 or visiting our contact page.