By Cydney Posner

Under Nasdaq Rule 4350(b)(1)(A), each Nasdaq issuer was required to distribute to shareholders a copy of an annual report containing audited financial statements. The SEC has now approved, on an accelerated basis, Nasdaq's proposed modification of that requirement (see my posting dated 12/15/06), which will permit a company to distribute its annual report electronically, similar to the manner permitted in the rule adopted by the NYSE. More specifically, the amended rule will allow a listed company to distribute its annual report by posting it on a website and simultaneously issuing a press release stating that the annual report has been filed with the SEC (or other appropriate regulatory authority), that the annual report is available on the company’s publicly available website and that shareholders can receive a hard copy free of charge upon request. The hard copy must be provided within a reasonable time period following the request. As adopted, the amended rule will apply to all Nasdaq issuers and not just issuers of common stock and voting preferred stock (and their equivalents) as originally proposed.

The rule change also provides that the annual report requirement can be satisfied by making available to shareholders the company’s annual filing with the SEC, such as Forms 10-K, 20-F or 40-F. There is no Nasdaq requirement for timing of delivery of the annual report, which would be governed by the SEC's rules. In addition, Nasdaq is also removing the provision requiring that the annual report be filed with Nasdaq because Nasdaq has access through EDGAR.

In addition, Nasdaq has made a technical correction to Rule 4350(b)(1)(B), relating to the disclosure required if a company receives a "going concern qualification." The change removes the term "going concern qualification," which is undefined in the accounting literature, and replaces it with language from SAS 59, which relates to the auditor's consideration of an entity's ability to continue as a going concern.

With respect to disclosure by foreign private issuers of non-conforming governance practices, Nasdaq required that foreign private issuers disclose all non-conforming governance practices in their Form F-1, 20-F or 40-F. As approved, Nasdaq has expanded the existing Nasdaq rule to allow this disclosure to be made either in these forms or, alternatively, in English on the company's website. If, however, the disclosure is available only on the website, the issuer’s annual report and registration statement should state this fact and provide the web address at which the information may be obtained.

This content is provided for general informational purposes only, and your access or use of the content does not create an attorney-client relationship between you or your organization and Cooley LLP, Cooley (UK) LLP, or any other affiliated practice or entity (collectively referred to as "Cooley"). By accessing this content, you agree that the information provided does not constitute legal or other professional advice. This content is not a substitute for obtaining legal advice from a qualified attorney licensed in your jurisdiction, and you should not act or refrain from acting based on this content. This content may be changed without notice. It is not guaranteed to be complete, correct or up to date, and it may not reflect the most current legal developments. Prior results do not guarantee a similar outcome. Do not send any confidential information to Cooley, as we do not have any duty to keep any information you provide to us confidential. When advising companies, our attorney-client relationship is with the company, not with any individual. This content may have been generated with the assistance of artificial intelligence (Al) in accordance with our Al Principles, may be considered Attorney Advertising and is subject to our legal notices.