No suspension of trading in: Overview, definition, and example
What is no suspension of trading in?
No suspension of trading in is a clause commonly found in securities purchase agreements, underwriting agreements, and investment contracts. It confirms that the issuer’s securities are currently listed or quoted for trading and that there has been no suspension—or threat of suspension—of trading in those securities by the relevant stock exchange or quotation system.
Why is no suspension of trading in important?
For investors, this clause provides assurance that the securities they’re purchasing remain actively tradable and haven’t been subject to delisting or regulatory action. If trading is suspended, it can impact liquidity, pricing, and the investor’s ability to exit the position. This clause helps protect investors by making it a condition that the securities remain listed and in good standing with the relevant market.
Understanding no suspension of trading in through an example
An investor agrees to buy common stock from a public company in a private placement. The purchase agreement includes a no suspension of trading in clause stating that the company’s shares are actively traded on the Nasdaq and that there’s no pending suspension. If, during the closing process, Nasdaq issues a delisting notice, the investor could use this clause to walk away from the deal or delay funding until the issue is resolved.
Example of a no suspension of trading in clause
Here's how a no suspension of trading in clause may appear in a contract:
"There is no action or proceeding pending or, to the Company’s knowledge, threatened by the Nasdaq Stock Market, the SEC, or any other regulatory authority to suspend or delist the trading of the Company’s Common Stock, and the Company is in compliance with all applicable listing requirements."
Conclusion
The no suspension of trading in clause gives investors confidence that the securities they’re acquiring are stable and publicly tradable. It helps manage regulatory and liquidity risks and provides a clear signal that the company is in good standing with its listing exchange. If your transaction involves public company shares, this clause is a key part of the risk assessment.
This article contains general legal information and does not contain legal advice. Cobrief is not a law firm or a substitute for an attorney or law firm. The law is complex and changes often. For legal advice, please ask a lawyer.