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On August 26, 2024, the U.S. Securities and Exchange Commission (SEC) issued an order granting approval of The Nasdaq Stock Market LLC’s (Nasdaq’s) proposed rule change, to Nasdaq Rules 5605, 5615, and 5810. These amendments 1) clarify and modify the phase-in schedules for certain corporate governance requirements, making them substantially similar to the phase-in schedules available for similar companies listing on the New York Stock Exchange (NYSE), and 2) clarify the applicability of certain cure periods.

Phase-In Schedules

Nasdaq Rule 5615(b) sets forth the phase-in schedules for companies listing in connection with an initial public offering (IPO), companies emerging from bankruptcy, companies transferring from other markets, companies ceasing to be smaller reporting companies, and companies ceasing to be controlled companies. The rule change amends these existing phase-in schedules and expands Nasdaq Rule 5615(b) to include phase-in schedules for companies previously registered pursuant to Exchange Act Section 12(g), companies listing in connection with a carve-out or spin-off transaction, and companies ceasing to qualify as foreign private issuers. A summary of the rule change is set forth below.

A company listing in connection with an IPO. Nasdaq Rule 5615(b)(1) has been amended to align the phase-in periods for companies listing in connection with an IPO with the phase-in periods available for similar companies listing on the NYSE. For ease of reference, a summary of these phase-in periods is set forth in the table below, including a comparison of the old and new Nasdaq rules, and the NYSE rules. 

Old Nasdaq RuleNew Nasdaq RuleNYSE Rule
Majority board requirement12 months from the date of listing




Nasdaq Rule 5615(b)(1)		12 months from the date the company’s securities first trade on Nasdaq (Listing Date)

Nasdaq Rule 5615(b)(1)(A)		Within one year of the listing date




Listed Company Manual (LCM) Section 303A.00
Audit committee independence and qualifications requirementsReferences Exchange Act Rule 10A-3(b)(1)(iv)(A)



















Nasdaq Rule 5615(b)(1)		Same as Old Nasdaq Rule, but amended to restate phase-in periods from Exchange Act Rule 10A-3(b)(1)(iv)(A):

One member at Listing Date

A majority of members within 90 days of effective date of registration statement

All members within one year of effective date of registration statement


Nasdaq Rule 5615(b)(1)(B)		Same as New Nasdaq Rule




















LCM Section 303A.00
Audit committee number of membersMinimum of 3 members at time of listing








Nasdaq Rule 5605(c)(2)(A)		At least one member by Listing Date

At least two members within 90 days of Listing Date

At least three members within one year of Listing Date

Nasdaq Rule 5615(b)(1)(B)		Same as New Nasdaq Rule









LCM Section 303A.00
Compensation committee independence requirementsOne member at time of listing

Majority of members within 90 days of listing

All members within one year listing







Nasdaq Rule 5615(b)(1)		One member by the earlier of the date the IPO closes or five business days from the Listing Date

A majority of members within 90 days of the Listing Date

All  members within one year of the Listing Date


Nasdaq Rule 5615(b)(1)(C)		Same as New Nasdaq Rule














LCM Section 303A.00
Compensation committee number of membersAt least one member at time of listing

At least two members within one year of listing


Securities Exchange Act Release No. 68013 (October 9, 2012) at footnote 67.		At least one member by Listing Date

At least two members within one year of Listing Date


Nasdaq Rule 5615(b)(1)(C)		No minimum number of members requirement





See LCM Section 303A.05
Nominations committee independence requirementsOne member at time of listing

Majority of members within 90 days of listing

All members within one year listing

However, companies may choose not to adopt a nominations committee and may instead rely upon a majority of the independent directors to discharge responsibilities under Nasdaq Rule 5605(b) (sic)





Nasdaq Rule 5615(b)(1)		One member by the earlier of the date the IPO closes or five business days from the Listing Date
A majority of members within 90 days of the Listing Date

All  members within one year of the Listing Date

However, companies may choose not to adopt a nominations committee and may instead rely upon a majority of the independent directors to discharge responsibilities under Nasdaq Rule 5605(e)


Nasdaq Rule 5615(b)(1)(C)		Same as New Nasdaq Rule, except NYSE-listed companies are required to have a nominating committee and so may not rely upon a majority of the independent directors
















LCM Sections 303A.00 and 303A.04

Amended phase-in schedules.[1]

  • A company emerging from bankruptcy. Under Nasdaq Rule 5615(b)(2), companies that are emerging from bankruptcy are permitted to phase-in the majority independent board requirement and the independent nominations and compensation committees’ requirements on the same schedule as companies listing in connection with their IPO. Under the rule change, Nasdaq Rule 5615(b)(2) has been amended to 1) clarify that the applicable phase-in periods will be computed beginning on the Listing Date, 2) clarify that a company emerging from bankruptcy is permitted to phase-in the number of compensation members’ requirement on the same schedule as companies listing in connection with their IPO, and 3) codify Nasdaq’s existing position requiring a company emerging from bankruptcy to comply with the audit committee composition requirements in Nasdaq Rule 5605(c)(2) (including the requirement to have at least three members) by the Listing Date, unless an exemption is available under Exchange Act Rule 10A-3.
  • A company transferring from a national securities exchange or other market. Under Nasdaq Rule 5615(b)(3), companies that are transferring from other exchanges with substantially similar board and committee requirements are afforded the balance of any grace period afforded by the other exchange. Conversely, companies that are transferring from other exchanges that do not have substantially similar requirements will be afforded one year from the date of listing on Nasdaq to comply with such requirements. Under the rule change, Nasdaq Rule 5615(b)(3) has been amended to clarify that the foregoing phase-ins apply only where a company transfers securities registered under Exchange Act Section 12(b) from another national securities exchange. A new subsection (B) has been added to address phase-in schedules for companies previously registered pursuant to Exchange Act Section 12(g). For a discussion of new subsection (B), please see the section, “Expanded phase-in schedules,” below.
  • A company ceasing to be a controlled company. Under Nasdaq Rule 5615(c)(3), a company that ceases to be a controlled company is permitted to phase-in the majority independent board requirement and the independent nominations and compensation committees’ requirements, on the same schedule as companies listing in connection with their IPO. However, the company will be required to comply with the audit committee requirements in Nasdaq Rule 5605(c) as of the date it ceases to be a controlled company. Under the rule change, this provision has been moved from Nasdaq Rule 5615(c)(3) to new Nasdaq Rule 5615(b)(7) and has been amended to clarify that the applicable phase-in periods are computed beginning on the date the company ceases to be a controlled company.

Expanded phase-in schedules.

  • A company transferring from a national securities exchange or other market. As referenced above, new subsection (B) has been added to Nasdaq Rule 5615(b)(3) to provide that a company whose securities were registered under Exchange Act Section 12(g) immediately prior to listing on Nasdaq is permitted to phase-in the majority independent board requirement, the independent nominations and compensation committees’ requirements, and the number of compensation and audit committee members’ requirements, as follows:
    • Majority board requirement: Twelve months from its Listing Date
    • Audit committee independence and qualifications requirements: By the Listing Date, unless an exemption is available pursuant to Exchange Act Rule 10A-3
    • Audit committee number of members requirement: At least one member by the Listing Date, at least two members within 90 days of the Listing Date, and at least three members within one year of the Listing Date
    • Compensation committee and nominations committee (if it has a nominations committee) independence requirements: At least one member by the Listing Date, a majority of members within 90 days of the Listing Date, and all members within one year of the Listing Date
    • Compensation committee number of members requirement: At least one member by the Listing Date and at least two members within one year of the Listing Date.
  • A company listing in connection with a carve-out or spin-off transaction. The rule change added new Nasdaq Rule 5615(b)(4), which provides that a company listing in connection with a carve-out or spin-off transaction is permitted to phase-in the majority independent board requirement, the independent nominations, compensation, and audit committees’ requirements, and the number of compensation and audit committee members’ requirements, on a similar schedule as companies listing in connection with their IPO. The phase-in schedule for the independent nominations and compensation committees’ requirements, and the number of compensation committee members’ requirement differs slightly from the phase-in schedule for companies listing in connection with their IPO. Under Nasdaq Rule 5615(b)(4)(C), the company must have one independent member of its compensation committee and nominations committee (assuming the company has a nominations committee) by the date the transaction closes, a majority of independent members within 90 days of the Listing Date, and all independent members within one year of the Listing Date. In addition, the company must have at least one member on its compensation committee by the date the transaction closes and at least two members within one year of the Listing Date.
  • A company ceasing to be a foreign private issuer. The rule change added new Nasdaq Rule 5615(b)(6), which provides the phase-in schedule for companies that cease to qualify as a foreign private issuer under SEC rules. Under Exchange Act Rule 3b-4, a company must test its status as a foreign private issuer on an annual basis at the end of its most recently completed second fiscal quarter (determination date). If the company fails to qualify as a foreign private issuer, then it would be ineligible to use the forms and rules for foreign private issuers beginning on the first day of the fiscal year following the determination date (i.e., effectively providing the company with a six-month grace period). Under Nasdaq Rule 5615(b)(6), if the company fails to qualify as a foreign private issuer, the company will have six months from the determination date to comply with the majority independent board and executive sessions requirements in Nasdaq Rule 5605(b), the independent compensation and nominations committee requirements in Nasdaq Rules 5605(d)(2) and (e)(1)(B), and the audit committee requirements in Nasdaq Rule 5605(c)(2) except for the requirement in Nasdaq Rule 5605(c)(2)(A)(ii), including the requirement to have three members on the audit committee. During the phase-in period, the company must continue to have an audit committee that satisfies Nasdaq Rule 5605(c)(3) and the audit committee members must meet the criteria for independence in Nasdaq Rule 5605(c)(2)(A)(ii).

In addition to the clarifications and modifications to the phase-in periods discussed above, Nasdaq codified its existing policy in the preamble to Nasdaq Rule 5615, stating that where a company “demonstrates compliance with a requirement during a phase-in period but subsequently falls out of compliance before the end of the phase-in period, the [c]ompany will not be considered deficient with the requirement until the end of the phase-in period.”

Cure Periods

The Nasdaq Rules provide for cure periods for companies that fail to comply with the majority independent board requirement, the audit committee composition requirement, and the compensation committee requirement, in each case, due to one vacancy, or one member ceasing to be independent due to circumstances beyond their reasonable control. See Nasdaq Rules 5605(b)(1)(A), 5605(c)(4), and 5605(d)(4). The rule change added a new section to each of these cure periods that provides that a company is not eligible for the applicable cure period, immediately following the expiration of a phase-in period under Nasdaq Rule 5615(b) upon which the company was relying, unless the company complied with such requirement during the phase-in period and fell out of compliance with such requirement after having complied with it before the end of the phase-in period. Where the company is not eligible for the applicable cure period (i.e., it relied on the phase-in period, but allowed the phase-in period to run out without demonstrating compliance), Nasdaq Rule 5810(c)(E) has been amended to provide that the Listing Qualifications Department will issue a Staff Delisting Determination letter to delist the company’s securities.

[1] Although not discussed in this post, the rule change included a minor clarification to Nasdaq Rule 5615(b)(5), with respect to companies ceasing to be smaller reporting companies, to clarify that companies ceasing to qualify as smaller reporting companies are permitted to phase in compliance as provided under that rule.