The SEC recently adopted the most significant amendments to Rules 144 and 145 in over a decade. Rule 144 governs public resales of restricted securities (securities originally sold in an unregistered private placement) and control securities (securities held by affiliates). Rule 145 governs resales of securities received in certain stock-for-stock business combinations. The revised rules will be effective on February 4, 2008.
Rule 144 Amendments. The Rule 144 amendments significantly shorten the holding period applicable to resales of securities by both affiliates and non-affiliates. The amendments also substantially reduce the other Rule 144 restrictions applicable to resales by non-affiliates.
The amendments of most general interest:
- Allow affiliates of reporting companies to resell restricted securities after a six-month holding period (previously one year), subject to the public information, volume, manner of sale and Form 144 filing requirements;
- Allow non-affiliates of reporting companies to resell restricted securities after a six-month holding period, subject only to the public information requirement;
- Allow non-affiliates of reporting companies to resell restricted securities after a 12-month holding period without restriction;
- Raise the thresholds that trigger Form 144 filing requirements for resales by affiliates from 500 shares or $10,000 to 5,000 shares or $50,000; and
- Eliminate the Form 144 filing requirement for resales by non-affiliates.
Different rules apply to "non-reporting" companies.
Rule 145 Amendments. Prior to the amendments, shares received by certain shareholders of an acquired company in a stock-for-stock transaction were subject to resale restrictions. The Rule 145 amendments now provide that these shares are freely tradable without restriction, by:
- Eliminating the "presumptive underwriter" provision, except for transactions involving blank check or shell companies; and
- Revising the resale provisions of Rule 145(d).
The amendments to Rules 144 and 145 are intended to increase the liquidity of privately sold and control securities. This, in turn, should make capital raising and stock-for-stock acquisitions easier and less costly.
The SEC published the final, adopting release on December 6, 2007. The release is available at http://www.sec.gov/rules/final/2007/33-8869.pdf.
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