The Securities Act of 1933, as amended (the “Securities Act”) requires the offer and sale of securities to be registered under the Securities Act, unless the security or transaction qualifies for an exemption from registration. Rule 144 of the Securities Act provides a safe harbor that permits holders of “restricted securities” to resell their securities publicly if the holder complies with specific conditions. In order to remove the legend from certificates representing shares being resold in reliance upon Rule 144, an opinion from an securities attorney is required.
Rule 144 also applies to the public sale of any securities held by directors, executive officers and other “affiliates” of the issuer. Most often stockholders rely on Rule 144 in going public transactions when holding shares that are not subject to an effective Form S-1 registration statement.
Rule 144’s safe harbor can be used for resale of two types of securities: “restricted” and “control” securities if certain requirements are met.
A security can be both a restricted and a control security. 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 issuers who go public direct and undertake direct public offerings as well as those who pursue reverse mergers with public shells often purchase shares in Regulation D offerings that are resold in reliance upon to Rule 144.
Control securities are owned by a person who qualifies as an “affiliate” of the issuer. An “affiliate” is a person that controls, is controlled by or is under common control with the issuer. Although the SEC has not set a standard for determining whether a person is an “affiliate,” “affiliates” generally include directors, executive officers and major shareholders that can exercise influence over the company individually or by acting with others.
Rule 144 is not available for the resale of securities that were initially issued by either reporting or non-reporting shell companies (other than a business combination related shell company) or an issuer that has at any time previously been a reporting or non-reporting shell company, unless the issuer meets specified conditions. A security holder may resell securities pursuant to Rule 144’s safe harbor only if the following conditions are met:
a) The issuer of securities that was formerly a reporting or non-reporting shell company has ceased to be a shell;
b) The issuer of the securities is subject to the reporting requirements of Section 13 or 15(d) of the Exchange Act;
d) At least one year has elapsed from the time the issuer filed current For
m 10 type information with the SEC reflecting its status as an entity that is not a shell company.
For further information about this securities law blog post, please contact Brenda Hamilton, Securities Attorney at 101 Plaza Real S, Suite 202 N, Boca Raton Florida, (561) 416-8956, by email at info@securitieslawyer101.com or visit www.gopublic101.com. This securities law blog post is provided as a general informational service to clients and friends of Hamilton & Associates Law Group and should not be construed as, and does not constitute, legal and compliance advice on any specific matter, nor does this message create an attorney-client relationship. For more information about going public and the rules and regulations affecting the use of Rule 144, Form 8K, crowdfunding, FINRA Rule 6490, Rule 506 private placement offerings and memorandums, Regulation A, Rule 504 offerings, SEC reporting requirements, SEC registration statements on Form S-1 , IPO’s, OTC Pink Sheet listings, Form 10 OTCBB and OTC Markets disclosure requirements, DTC Chills, Global Locks, reverse mergers, public shells, direct public offerings and direct public offerings please contact Hamilton and Associates at (561) 416-8956 or info@securitieslawyer101.com. Please note that the prior results discussed herein do not guarantee similar outcomes.
Hamilton & Associates | Securities Lawyers
Brenda Hamilton, Securities Attorney
101 Plaza Real South, Suite 202 North
Boca Raton, Florida 33432
Telephone: (561) 416-8956
Facsimile: (561) 416-2855
www.GoPublic101.com
