Securities offerings and listings in the US: an ... - Latham & Watkins

Chapter 3 – Key exemptions from Securities Act registration• Sales after one-year minimum holding period: afterthe one-year minimum holding period has expired,limited resales of restricted securities may be madeif:- Information: 137 either the issuer is an Exchange Actreporting company that has been subject toreporting requirements for 90 days prior to the saleand has filed all required reports in the 12 monthsprior to the sale, or certain other informationabout the issuer must be publicly available;- Volume limitations: 138 only certain amounts ofsecurities may be resold;- Manner of sale: 139 securities must be resold inunsolicited brokers’ transactions; and- Notice of sale: 140 if more than 500 shares or $10,000worth of securities are sold in any three-monthperiod, the seller must file a notice on Form 144with the SEC.• Sales after two years: 141 non-affiliates of the issuermay freely resell restricted securities once two yearshave passed from the date the securities wereacquired from an issuer or an affiliate of an issuer. 142Rule 802 – securities issuances inconnection with cross-borderexchange offers and businesscombinations(i) GeneralSecurities Act Rule 802 provides an exemption fromregistration for offers and sales in any exchange offeror business combination involving the acquisition ofsecurities of a foreign private issuer. Rule 802 doesnot impose a dollar limitation on the value of securitiessold to US investors in an exempt transaction, andboth domestic US and foreign private issuers may relyon Rule 802. 143 Rule 802 provides an exemption onlyfor the issuer of securities and not for affiliates of theissuer or any person who seeks to resell the securities. 144Accordingly, resales of securities acquired under Rule802 must either be registered or structured to takeadvantage of an available exemption from registration.(ii) Requirements of Rule 802The requirements of Rule 802 are as follows:• Limitation on US ownership: 145 US holders ofsecurities must hold 10% or less of the class ofsecurities that is the subject of the exchange offer orbusiness combination. However, if there are no USshareholders, Rule 802 is not available. 146• Calculation of 10% limit: A US holder is defined asa person resident in the United States. 147 Indetermining whether or not a holder is a USresident, a bidder must look through the recordownership of securities held by brokers, dealers,banks and other nominees located in the UnitedStates, the target company’s jurisdiction of incorporation,and the jurisdiction that is the primarytrading market of the target securities. 148 This is nota determination of ultimate beneficial ownership;instead, only the first line of ownership behind thebroker or nominee must be established. Thecalculation date is 30 days prior to thecommencement of the exchange offer or the solicitationfor a business combination. 149 However, thecalculation excludes securities held by personsowning more than 10% of the class of securitiessought in the exchange offer or businesscombination, as well as securities held by thebidder. 150• Equal treatment of US holders: 151 The bidder mustpermit US holders of securities to participate in theexchange offer or business combination on terms atleast as favourable as those offered to other holders,but is not required to extend the offering into anyUS state that would require registration or qualificationof the transaction.www.iflr.comUS SECURITIES OFFERINGS: A GUIDE FOR NON-US ISSUERS23