The Securities Act of 1933, as amended (the “Securities Act”) requires that the sale of a security be registered under the Securities Act, unless the security or transaction qualifies for an exemption from registration. Rule 144 of the Securities Law provides a safe harbor that allows holders of “restricted securities” to resell their securities in the public market, if specific conditions are met. To remove the caption from certificates representing shares that are resold pursuant to Rule 144, the opinion of an SEC attorney is required.
Rule 144 also applies to the public sale of any security held by directors, executive officers and other “affiliates” of the issuer. Rule 144 is potentially available for the resale of two types of securities: “restricted” and “control” securities. A security can be both restricted and control. Rule 144 imposes a holding period only for restricted securities. Restricted securities are securities acquired from an issuer, or an affiliate of an issuer, in a transaction or chain of transactions that does not involve a public offering. Shareholders of directly publicly traded issuers conducting direct public offerings and those seeking reverse mergers with public structures often own shares subject to Rule 144.
Control securities are owned by a person who qualifies as an “affiliate” of the issuer. An “affiliate” is a person who controls, is controlled by, or is under common control with the issuer. Although the SEC has not established a standard for determining whether an individual is an “affiliate,” “affiliates” generally include directors, officers, and major shareholders who can influence the company individually or by acting with others.
Rule 144 is not available for the resale of securities that were initially issued by reporting or non-reporting shell companies (other than a shell company related to the business combination) or an issuer that was at any time prior, reporting or not. informant. shell company, unless the issuer meets the specified conditions. A security holder may resell securities under the safe harbor of Rule 144 only if the following conditions are met:
a) The issuer of securities that was previously a reporting or non-reporting shell company is no longer a shell
b) The issuer of the securities is subject to the information requirements of Section 13 or 15 (d) of the Stock Exchange Law.
c) The issuer of the securities has submitted all the reports and material that must be submitted pursuant to Section 13 or 15 (d) of the Stock Exchange Act, as applicable, during the previous 12 months (or for a shorter period). the issuer to file such reports and materials), other than Form 8-K reports; Y
d) At least one year has elapsed since the issuer filed current Form 10 information with the SEC that reflects its status as a non-shell entity.
