Nasdaq's voting rule carries no dual-class sunset requirement

The record

Nasdaq's own listing rule, Rule 5640 and its Interpretive Material IM-5640, states that “voting rights of existing Shareholders of publicly traded common stock…cannot be disparately reduced or restricted through any corporate action or issuance,” and its interpretive policy specifically states that “Companies with existing dual class capital structures would generally be permitted to issue additional shares of the existing super voting stock without conflict with this policy.” Neither the rule nor its interpretation imposes a time- or event-based sunset on a dual-class structure a company adopts before or at listing. The Council of Institutional Investors, an investor advocacy group, states on its own Dual-Class Stock resource page that it has “pressed dual-class IPO companies to include reasonable time-based ‘sunset’ provisions in their charters,” recommending seven years or fewer, and reports that 51% of newly public U.S. dual-class companies in the first half of 2021 included a time-based sunset voluntarily.

What the documents establish

Nasdaq's rule text is the exchange's own binding requirement; CII's page is an investor group's advocacy position describing a gap in that requirement, not a rule either exchange has adopted. A separate document, the SEC Investor Advisory Committee's recommendation on dual class and other entrenching governance structures, states that “existing stock exchange listing standards limit the ability of listed companies to take actions that increase or create disparate voting rights without being delisted” — citing Nasdaq's Rule 5640 by name — while recommending SEC disclosure changes rather than a sunset mandate. None of the three documents states Nasdaq or NYSE currently requires a sunset as a condition of initial listing; the rule addresses only post-listing changes, leaving the initial allocation, and any sunset, to the company's own charter.

The operating read

A founder considering a dual-class structure should treat claims that “the exchange requires” a sunset with caution: no such requirement exists in either exchange's listing standards, and a sunset provision, when one appears, is the product of negotiation with underwriters and investors, not a rule compelled by the listing venue. CII's seven-year benchmark and its reported 51% adoption rate describe market practice and advocacy, not a floor a company must meet to list. This is an editorial reading of a documented gap; it does not predict whether either exchange will adopt a sunset requirement in the future.

What to check before you decide

Before assuming a dual-class structure is subject to any external sunset requirement, check the following against current documents.

• Does the company's own certificate of incorporation contain a time-based or event-based sunset provision, and if not, was one considered and rejected during negotiation?
• Have Nasdaq or NYSE listing standards changed since this record was retrieved on 16 September 2026, given that both exchanges periodically file rule changes with the SEC?
• Does a specific index provider's inclusion criteria, separate from exchange listing rules, impose its own voting-structure requirements relevant to the company's investor base?

Because exchange rulebooks are amended by SEC-filed rule changes, a reader relying on this record for a live listing decision should confirm the current rule text directly with the exchange rather than relying on an archived version.