The NYSE has proposed a new rule change: if a company is out of compliance with a continued listing standard and it owes the NYSE any unpaid fees, the NYSE will not review a compliance plan submitted by that company and, instead, will “immediately commence suspension and delisting procedures if such fees are not paid in full by the plan submission deadline or at the time of any required periodic review of such plan.” 

Basically, there’s a lot of work involved for the NYSE if a company falls out of compliance: under Sections 802.02 and .03, if a company falls out of compliance with a listing standard, the NYSE will notify the company and the company can submit a plan (including financial projections and other specified information) to bring itself back into compliance, identifying specific milestones against which the NYSE can measure the company’s progress. The company has 45 days (90 days for non-US companies) to submit a plan (referred to as the plan deadlines) demonstrating how the company expects to come back into compliance within 18 months. The NYSE will then evaluate whether the plan is reasonable and, if the plan is accepted, will review the extent of compliance on a quarterly (or semi-annual for non-US) basis.  If the company falls short on some aspect of the plan, the NYSE will review the circumstances and may determine to proceed with suspension and delisting procedures. If the company shows that it has returned to compliance, the NYSE will deem the plan period to be over. If the company is unable to meet the listing standards at the end of the 18-month period, it will be subject to suspension and delisting procedures.

All of that process is “resource-intensive and costly” for the NYSE and, as a result, the NYSE wants all the deadbeats to pay up first the NYSE “believes it is especially important to ensure that companies that wish to have a Plan accepted or continued by the Exchange have paid all outstanding annual and listing fees (as set forth in the Manual in Section 902.00 et seq) prior to the acceptance of a Plan or any required periodic review of such Plan.”  To that end, the NYSE is proposing to amend Sections 802.02 and 802.03 of the Manual to provide that a listed company that has fallen out of compliance and wants to submit a plan to the NYSE “must pay all outstanding annual and listing fees to the Exchange by the Plan Deadline and that failure to do so will result in the immediate commencement of suspension and delisting proceedings in accordance with Section 804.00.  Similarly, the Exchange proposes to amend Sections 802.02 and 802.03 to provide that a Plan will be truncated and immediate suspension and delisting procedures will commence if the listed company has not paid all outstanding annual and listing fees to the Exchange at the time of any quarterly or semi-annual review of such Plan.” The NYSE notes that the NYSE listing agreement requires that fees be paid when due and the Manual permits the NYSE, in its sole discretion, to subject a listed company to the commencement of immediate suspension and delisting procedures if the company has “violated” any of its agreements with the NYSE.

Posted by Cydney Posner