Earlier this month, Nasdaq reaffirmed and expanded its previous guidance that former SPAC executives can be considered independent directors on a post-business combination board of directors.  

In its original guidance (Staff Interpretation Letter 2008-11; Identification Number 756), Nasdaq provided that a former SPAC executive officer could be considered an independent director on the post-business combination board if:

• Prior to the merger, the SPAC had no operations, no employees and no assets other than an indirect interest in the trust account.
• The director was previously an executive officer, but not an employee, of the SPAC, and received no compensation from the SPAC for serving as an officer.  
• Upon the closing of the business combination, the directors resigned as an officer.  
• The target company’s financial statements become the historical financial statements of the post business combination company.

The new guidance (Staff Interpretation Letter 2023-02; Identification Number 1866), reaffirms that position. In addition, the staff presented a case where the SPAC paid a monthly amount for health care benefits to all of the SPAC’s executive officers. The maximum amount allowed for this benefit, in the aggregate for all of the SPAC’s executive officers, was approximately $72,000 per year (the health care expenses), and there were no individual payments to any member of the SPAC’s management. In this scenario, Nasdaq took the position that even if the health care expenses were treated as compensation, such compensation would be less than $120,000 during any period of 12 consecutive months within the prior three years and, therefore, would not prevent the former executive from being considered an independent director for the post-business combination company under Rule 5605(a)(2)(B).

This new guidance expands the former guidance and gives post-business combination companies an additional pool of potential independent directors.