Current through Register Vol. 48, No. 12, March 22, 2024
a) "Control", as
used in this Section, means the power, directly or indirectly, to direct the
management or policies of a company, whether through ownership of securities,
by contract, or otherwise. There is a presumption of control for any person
who:
1) is a director, general partner,
member or manager of a limited liability company, or officer exercising
executive responsibility (or has similar status or functions);
2) has the right to vote 20% or more of a
class of voting securities or the power to sell or direct the sale of 20% or
more of a class of voting securities; or
3) in the case of a partnership or limited
liability company, has the right to receive upon dissolution, or has
contributed, 20% or more of the capital.
b) "Eligible Privately Held Company", as used
in this Section, means a company meeting both of the following conditions:
1) The company does not have any class of
securities registered, or required to be registered, with the U.S. Securities
and Exchange Commission (SEC) under section 12 of the Securities Exchange Act
of 1934 ( 15 USC
78
l) or with respect to
which the company files, or is required to file, periodic information,
documents and reports under section 15(d) of that Act (
15 USC
78o(d) ).
2) In the fiscal year ending immediately
before the fiscal year in which the services of the merger and acquisition
broker are initially engaged with respect to the securities transaction, the
company meets either or both of the following conditions (determined in
accordance with the historical financial accounting records of the company):
A) The earnings of the company before
interest, taxes, depreciation and amortization are less than
$25,000,000.
B) The gross revenues
of the company are less than $250,000,000.
3) Inflation Adjustment
A) In regards to inflation, on the date that
is five years after the date of the enactment of the rule, and every five years
thereafter, each dollar amount in subsection (b)(2) shall be adjusted by:
i) dividing the annual value of the
Employment Cost Index for wages and salaries, private industry workers (or any
successor index), as published by the Bureau of Labor Statistics, for the
calendar year preceding the calendar year in which the adjustment is being made
by the annual value of the index (or successor) for the calendar year ending
December 31, 2015; and
ii)
multiplying such dollar amount by the quotient obtained under subsection
(b)(3)(A)(i).
B) In
regards to rounding, each dollar amount determined under this subsection (b)(3)
shall be rounded to the nearest multiple of $100,000.
c) "Merger and Acquisition
Broker", as used in this Section, means any broker and any person associated
with a broker engaged in the business of effecting securities transactions
solely in connection with the transfer of ownership of an eligible privately
held company, regardless of whether that broker acts on behalf of a seller or
buyer, through the purchase, sale, exchange, issuance, repurchase or redemption
of, or a business combination involving, securities or assets of the eligible
privately held company if the broker reasonably believes:
1) that, upon consummation of the
transaction, any person acquiring securities or assets of the eligible
privately held company, acting alone or in concert, will control and, directly
or indirectly, will be active in the management of the eligible privately held
company or the business conducted with the assets of the eligible privately
held company; and
2) if any person
is offered securities in exchange for securities or assets of the eligible
privately held company, that person will, prior to becoming legally bound to
consummate the transaction, receive or have reasonable access to:
A) the most recent fiscal year-end financial
statements of the issuer of the securities as customarily prepared by its
management in the normal course of operations and, if the financial statements
of the issuer are audited, reviewed or compiled, any related statement by the
independent accountant;
B) a
balance sheet dated not more than 120 days before the date of the exchange
offer; and
C) information
pertaining to the management, business, results of operations for the period
covered by the foregoing financial statements, and any material loss
contingencies of the issuer.
d) "Public Shell Company", as used in this
Section, is a company that, at the time of a transaction with an eligible
privately held company:
1) has any class of
securities registered, or required to be registered, with the SEC under section
12 of the Securities Exchange Act of 1934 or with respect to which the company
files, or is required to file, periodic information, documents and reports
under section 15(b) of that Act;
2)
has no or nominal operations;
3)
has:
A) no or nominal assets;
B) assets consisting solely of cash and cash
equivalents; or
C) assets
consisting of any amount of cash and cash equivalents and nominal other
assets.
e)
Except as provided in subsections (f) and (g) of this Section, a merger and
acquisition broker shall be exempt from registration pursuant to Section 4(I)
of the Act.
f) A merger and
acquisition broker is not exempt from registration under this Section if the
broker does any of the following:
1) Directly
or indirectly, in connection with the transfer of ownership of an eligible
privately held company, receives, holds, transmits or has custody of the funds
or securities to be exchanged by the parties to the transaction.
2) Engages, on behalf of an issuer, in a
public offering of any class of securities that is registered, or is required
to be registered, with the SEC under section 12 of the Securities Exchange Act
of 1934 or with respect to which the issuer files, or is required to file,
periodic information, documents and reports under section 15(d) of that
Act.
3) Engages, on behalf of any
party, in a transaction involving a public shell company.
g) A merger and acquisition broker is not
exempt from registration under this Section if that broker is subject to any of
the following:
1) Suspension or revocation of
registration under section 15(b)(4) of the Securities Exchange Act of 1934 (
15 USC
78o(b)(4) );
2) A statutory disqualification described in
section 3(a)(39) of the Securities Exchange Act of 1934 (
15 USC
78c(a)(39) );
3) A disqualification under the rules adopted
by the SEC under section 926 of the Dodd-Frank Wall Street Reform and Consumer
Protection Act (
15 USC 77d
note); or
4) A final order
described in section 15(b)(4)(H) of the Securities Exchange Act of 1934 (
15 USC
78o(b)(4)(H) ).
h) Nothing in this Section shall
be construed to limit any other authority of the Secretary of State to exempt
any person, or any class of persons, from any provisions of the Act or this
Section.
i) Nothing in this Section
shall be construed to limit any other authority of the Secretary of State to
enforce other provisions of the Act or this Section.