Corporate Law Monitor : Corporate Lawyer & Attorney : Cole, Schotz, Meisel, Forman & Leonard Law Firm : NJ, Mid-Atlantic Business Transactions & Finance Law

NASDAQ Requires 10-Minute Notification Prior to Release of Material Information

Effective December 7, 2009, The Nasdaq Stock Market LLC (“Nasdaq”) requires Nasdaq-listed companies to provide Nasdaq’s Market Watch Department with at least 10 minutes prior notification when releasing material information. See Nasdaq Listing Rule 5250(b)(1). Previously, Nasdaq merely recommended such advance notice. Notification is required to be made through the Nasdaq electronic submission system available at www.nasdaq.net, except in emergency situations. This notice requirement is intended to provide Nasdaq with information to assess whether a trading halt is appropriate to permit full dissemination of the news to the public and to maintain an orderly trading market. The New York Stock Exchange contains similar notification requirements. See NYSE Listed Company Manual Section 202.06(B). Nasdaq also clarified that, consistent with the Securities and Exchange Commission (“SEC”) guidance, the posting of information on a company website by itself, would not satisfy the public disclosure requirements of Regulation FD. The final SEC Release No. 34-61008 (November 16, 2009) containing the amendments to the Nasdaq Listing Rules is available here.

SEC Proposes Amendments to Rules Regarding Internet Availability of Proxy Materials

In an effort to improve notice of and access to proxy materials and increase participation by shareholders in proxy voting, the SEC proposed amendments to the proxy rules under the Securities Exchange Act of 1934 (the “Exchange Act”). The proposed amendments would provide issuers and other soliciting persons with additional flexibility in formatting and drafting the Notice of Internet Availability of Proxy Materials (the “Notice”). If adopted, the Notice: (1) would be required to address specified topics, in lieu of the mandatory boiler-plate legend currently required in the Notice; (2) would not be required to mirror the proxy card so long as the Notice identified each matter being considered at the meeting; and (3) would be permitted to be accompanied by an explanation of the process of receiving or reviewing the proxy materials and voting. The proposed amendments would also modify the filing deadlines for a non-issuer soliciting person utilizing the notice-only option for delivery of proxy materials. Comments to the proposed amendments were due by November 20, 2009. If adopted, the final rules could be effective for the upcoming proxy season.

The proposing SEC Release No. 34-60825 (October 14, 2009) is available here. The final SEC adopting release with respect to the notice and access proxy rules is SEC Release 34-55146 (January 22, 2007) and is available here.

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On September 15, 2008, the New Jersey Assembly and Economic Development Committee released a package of seven bills aimed at improving New Jersey’s corporate governance statutes. Since that date, all of the bills have been passed by the entire Assembly, and four of the proposed bills have been signed into law. The remaining bills, have been reported on favorably by the Senate Commerce Committee, but have not yet signed into law.

The bills are modeled on Delaware General Corporation Law, a historically corporation-friendly statute. Supporters of the bills believe that if and when these bills are passed into law, that New Jersey will become a more attractive state to incorporate in and do business. Among other things, the bills will make it easier for corporations to act quickly by using email and other progressive tools to conduct corporate business.

The new bills that have been signed into law:

• Allow corporate directors to provide the corporation with notice of resignation that would only be effective upon the occurrence of a particular event. This creates greater flexibility by allowing directors to submit resignations prior to the conclusion of an event. This bill was approved and signed by the Governor on January 27, 2009 and can be found at N.J.S. 14A:6-3.
• Permit a corporation to eliminate plurality voting for the election of directors in the bylaws of the corporation. Prior New Jersey law provided that a corporation may only eliminate plurality voting in its certificate of incorporation. The new bill gives corporations more freedom to adopt different voting methods for the election of directors after its incorporation. This bill was approved and signed by the Governor on January 27, 2009 and can be found at N.J.S. 14A:5-24.
• Update the definition of “foreign corporation” to mirror similar definitions used in the New Jersey Limited Liability Company Act and the Uniform Limited Partnership Law. The bill provides New Jersey corporations the option to merge with and acquire or consolidate with unincorporated entities, in addition to the limited liability companies and partnership previously permitted. In addition, the bill allows domestic corporations to create partnerships with foreign businesses. This bill was approved and signed by the Governor on November 20, 2009 and can be found at N.J.S. 14A:1-2.1.
• Provide that corporations may grant different types of equities from those traditionally used by corporations, thus recognizing the trend of granting more restricted stock grants in lieu of stock options. This bill was approved and signed by the Governor on November 20, 2009 and can be found at N.J.S. 14A:8-1.

The new bills that have not yet been signed into law but have been passed by the State Senate:

• Permit any corporate notice required under the New Jersey Business Corporations Act to be filed electronically. Electronic filing not only saves corporations time and money, but also grants more direct access to the corporation’s shareholders and directors. This bill was unanimously passed in the Senate on December 10, 2009.
• Improve the speed at which corporate transactions can take place by providing one- and two-hour services for expedited over the counter corporate service requests. Currently, the fastest filing service takes up to 8.5 hours from when the request is received. This bill was unanimously passed in the Senate on December 10, 2009.
• The passage of the proposed bills is the first step towards what Assemblyman Joseph Vas, a sponsor of these bills, desires “…a stimulation of economy, a boost in the private sector job growth, and help reverse the state’s reputation as being business unfriendly.”

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Many business owners believe their company’s name is “cleared” for trademark purposes once it is registered as a business name. That is a dangerous misconception. The system for registering business names is separate from the system for clearing and registering trademarks. To minimize the risk of expensive infringement litigation and maximize protection for a company’s trademark, a business owner should have a complete trademark search conducted and should generally register their trademarks, not just their business names, with the federal or state governments.

Business names – technically, “trade names” – are registered by the county clerk (for sole proprietorships and general partnerships) and the State (for corporations, limited liability companies and limited partnerships). Trade names are legally distinct from trademarks and service marks. While a “trade name” identifies the company itself, a “trademark” distinguishes the company’s goods from another’s goods and identifies those goods as originating from a particular source. A “service mark” serves the same function for services.

The difference may seem technical, but failing to recognize it can lead to trouble. County or State registrations for trade names and alternate names neither reserve a trademark nor ensure a trade name will not infringe another business’s trademark, service mark or trade name. The state/county trade name registration system does not prohibit the registration of alternate names that infringe other trade names, much less trademarks and service marks, and the system does not cross-check between state and county records. The trade name registration/reservation process also does not check for registrations outside New Jersey or for unregistered uses of trademarks and service marks, which can have common law protection.

A comprehensive search of federal, state and public records is needed, therefore, to clear trademarks, service marks and trade names. That search should be done before a company invests time and money developing goodwill in the mark.

Once a mark is cleared, it should usually be registered with the federal Patent and Trademark Office or the State. Although registration is not mandatory, it enhances the scope of protection, deters infringements and affords registrants important advantages when trademark disputes end up in court.
 

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