The agent would then remit the proceeds, minus expenses, to the U.S. holders. This conclusion was premised on the implementation of measures both to prevent the targeting of U.S. investors and to prevent actual sales to persons in the United States or to U.S. persons in the offshore offer. 2. Paragraph (a)(4) of Rule 15c2-11 [17 CFR 240.15c2-11] requires a broker-dealer initiating a quotation for securities of a foreign private issuer to review, maintain in its files, and make reasonably available upon request, the information furnished to the Commission pursuant to Rule 12g3-2(b) since the beginning of the issuer's last fiscal year. Finally, neither Rule 801 nor 802 impose a dollar limitation on the value of securities that may be sold to U.S. investors in an exempt transaction. Further, in a rights or exchange offer, an acquiror will not need to register the securities being issued. Note: Form CB does not appear in the Code of Federal Regulations. Section 230.802 does not apply to exchange offers or business combinations by an investment company registered or required to be registered under the Investment Company Act of 1940 (15 U.S.C. If a company that qualifies as an FPI is the target in a tender offer or takeover bid or is a party to a merger or amalgamation, then various requirements otherwise imposed under the Securities Act or the Exchange Act may not apply under certain conditions. Foreign Private Issuers | Perkins Coie Exemption Rule 12g3-2(b) Exemption. Form CB is a cover sheet that incorporates the offering documents sent to security holders pursuant to the requirements of the country in which the issuer is incorporated. In addition, the NYSE and Nasdaq require certain notifications, certifications and affirmations relating to compliance with corporate governance rules. 611 0 obj <> endobj The issuer of the securities that are the subject of the tender offer is not an investment company registered or required to be registered under the Investment Company Act of 1940 (15 U.S.C. 78a et seq.) Otherwise, separate relief for foreign offers is not necessary. For the tender and exchange offer exemptions, domestic and foreign entities wishing to engage in cross-border transactions or that are the target of a tender offer will likely be the respondents to the collection of information requirement. Entities relying on the Tier I and Tier II exemptions will also benefit from the proposals because they will not need to comply with all of the procedural requirements of the tender offer rules.100 For example, in the Tier I exemption, an acquiror will be exempt from all of the procedural requirements of the U.S. tender offer rules, including those relating to the duration of the offer and withdrawal rights. 20264 (October 6, 1983). Otherwise, a rights offering or exchange offer could be used as a pretext for creating a large pool of freely tradable securities in the hands of investors who previously held only restricted securities. Third, the proposal that a bidder could terminate withdrawal rights in a cross-border tender offer once all conditions were satisfied and keep the offer open for acceptances only is also not necessary. The new form will include as an attachment a copy of any document, notice or other information disseminated to U.S. offerees. Above the 10 percent level of U.S. ownership, more tailored relief of the type permitted by the new Tier II exemption would address conflicting regulatory mandates and offering practices. (vii) Securities acquired in a transaction made under 230.802 to the same extent and proportion that the securities that were tendered or exchanged in the exchange offer or business combination were "restricted securities" within the meaning of this paragraph (a)(3). Rights offering means offers and sales for cash of equity securities where: (1) The issuer grants the existing security holders of a particular class of equity securities (including holders of depositary receipts evidencing those securities) the right to purchase or subscribe for additional securities of that class; and. Zhejiang Southeast Electric Power Co. Ltd. The ABA did not believe that the application of these requirements to offshore purchases of foreign securities presents a serious compliance problem or that the current approach is an impediment to cross-border transactions.33. We are adopting the Tier II exemption with some modifications from the 1998 proposals, because some of the relief contained in the 1998 proposals is no longer necessary due to the amendments adopted today in the Regulation M-A Release. The delegation of authority is intended to conserve Commission resources by permitting the staff to review and act on exemptive applications under Sections 14(d) and 36(a)11 of the Exchange Act when appropriate. 3235-0518 and 3235-0379. The commenters concurred that imposition of additional criteria would only diminish the effectiveness of the exemption by narrowing its scope and causing U.S. security holders to continue to be excluded. (ii) The issuer must disseminate any informational document to U.S. holders, including any amendments thereto, in English, on a comparable basis to that provided to security holders in the foreign subject company's home jurisdiction. The exemptions provided by paragraphs (c) and (d) of this section are not available for any securities transaction or series of transactions that technically complies with paragraph (c) or (d) of this section but are part of a plan or scheme to evade the provisions of Regulations 14D or 14E. In the past, some jurisdictions have permitted exclusion of U.S. holders despite domestic requirements to treat all holders equally on the basis that it would be impracticable to require the bidder to include U.S. holders. B. Entities relying on the Tier I exemption will benefit from the rules because they will not need to comply with the procedural and filing requirements of the tender offer rules. Specifically, an acquiror under Tier I will not need to file Schedule TO. (5) Eligibility of securities. We are not adopting the proposal that if a bidder commences an offer during an ongoing tender or exchange offer for securities of the same class subject to its offer, the bidder could calculate the percentage of subject securities held by U.S. holders as of the same date used by the initial bidder. A person conducting a tender offer (including any exchange offer) that meets the conditions in paragraph (d)(1) of this section shall be entitled to the exemptive relief specified in paragraph (d)(2) of this section provided that such tender offer complies with all the requirements of this section other than those for which an exemption has been specifically provided in paragraph (d)(2) of this section: (1) Conditions. 53 Because a rights offering may be used as a financing device, we considered keeping the threshold for rights offerings at five percent. As adopted, U.S. holders may be offered only cash, but the bidder must have a reasonable basis to believe that the cash is substantially equivalent to the value of the securities and any cash or other consideration offered to non-U.S. holders.26. By continuing to use this website, you are demonstrating your consent to the placement and use of cookies as described in ourCookie Policy., We use cookies on this website to enhance your user experience and to improve the quality of our site. Another example would be where a third-party bidder in a negotiated transaction desires to make an exchange offer or business combination in reliance on the Section 802 exemption. Foreign Private Issuers Going Public [Note: Form CB does not appear in the Code of Federal Regulations. The offer to U.S. holders must be made on terms at least as favorable as those offered any other holder of the same class of securities that is the subject of the tender offers. (b) to read as follows: [Note: Form F-X does not and this amendment will not appear in the Code of Federal Regulations.]. PART II INFORMATION NOT REQUIRED TO BE SENT TO SECURITY HOLDERS. Under new Securities Act exemptive Rule 802, securities issued in exchange offers for foreign private issuers' securities and securities issued in business combinations involving foreign private issuers will be exempt from the registration requirements of the Securities Act and the qualification requirements of the Trust Indenture Act, if U.S. security holders hold 10 percent or less of the subject class of securities. Securities issued under new Rules 801 or 802 would not be integrated with any other exempt offerings by the issuer. As proposed, the calculation would have been made at the commencement of the offer. When U.S. ownership is greater than 40 percent, the staff will consider relief on a case-by-case basis only when there is a direct conflict between the U.S. laws and practice and those of the home jurisdiction. (Non-GAAP C&DI Question 104.05), Financial measures that are required to be disclosed by a system of regulation of a governmental authority or self-regulatory organization that is applicable to the registrant (such as different levels of capital required by banks). (vi) Securities acquired in a transaction made under 230.801 to the same extent and proportion that the securities held by the security holder of the class with respect to which the rights offering was made were as of the record date for the rights offering "restricted securities" within the meaning of this paragraph (a)(3); and. (2) Limitation on U.S. ownership. Youre a Public Company? U.S. securities laws apply to these companies, but their U.S. reporting obligations vary widely. A statement at the commencement of the offer that the bidder may reduce the minimum condition is insufficient; The bidder must disseminate this announcement through a press release and other methods reasonably designed to inform U.S. security holders, which could include placing an advertisement in a newspaper of national circulation in the United States; The press release must state the exact percentage to which the acceptance condition may be reduced and state that a reduction is possible. The information and documents furnished on this Form are not deemed "filed" with the Commission or otherwise subject to the liabilities of Section 18 of the Exchange Act. Failure to qualify as an FPI would adversely affect a company's ability to rely on Regulation S for an exemption from registration under the Securities Act for offerings and sales of equity securities conducted outside the US. The following legend or an equivalent statement in clear, plain language, to the extent applicable, must be included on the cover page or other prominent portion of any informational document the offeror publishes or disseminates to U.S. holders: This exchange offer or business combination is made for the securities of a foreign company. 4. In some cases, the professional skills required will include the ability to translate from a foreign language into English. (c) Exchange offer. If those record owners hold securities for the accounts of customers, the issuer must determine the residency of those customers. If the bidder offers loan notes solely to offer sellers tax advantages not available in the United States and these notes are neither listed on any organized securities market nor registered under the Securities Act of 1933 (15 U.S.C. You may not be able to sue a foreign company or its officers or directors in a foreign court for violations of the U.S. securities laws. Operating and statistical measures (such as unit sales, number of employees, number of subscribers). U.S. investors must react to these transactions, which may significantly affect their existing investment in the foreign private issuer, without the disclosure or other protections afforded by U.S. or foreign law. The staff has granted no-action relief under the Securities Act registration requirements and the equal treatment requirement of Rule 14d-10 to qualifying vendor placements. If the premium is measured from the price one day before the bid, the average premium drops to 38%. When U.S. security holders own 10 percent or less of the issuer, U.S. participation is generally not necessary for the success of the offering. In order to provide a level playing field in the case of competing offers, we also believe it is appropriate to provide that if a bidder commences a tender offer or a business combination during an ongoing tender offer or business combination for securities of the same class that is the subject of its offer, the second bidder will be eligible to use the same exemption (Tier I, Tier II, or Rule 802) as the prior offeror provided that all the conditions of the exemption, other than the limitation on U.S. ownership, are satisfied by the second bidder. A copy of the FRFA may be obtained by contacting Laura Badian, in the Office of Mergers and Acquisitions, Division of Corporation Finance, Securities and Exchange Commission, 450 Fifth Street, N.W., Washington, D. C. 20549, at (202)942-2920. Distributes or is required to distribute to its securityholders. (iii) Informational documents. Exclude from the calculations other types of securities that are convertible or exchangeable into the securities that are the subject of the tender offer, such as warrants, options and convertible securities. This may require some bidders to translate documents. Since neither a U.S. residence nor the name of an offshore nominee will appear on the records of the issuer for the holder of the bearer securities, these securities will not be treated as being held by U.S. residents, unless the offeror knows or has reason to know that these securities are held by U.S. residents. This modification to the test should reduce the burden on foreign companies while still producing a reasonably accurate picture of whether U.S. ownership exceeds the specified thresholds. of the Regulation M-A Release, supra note 6. Securities acquired in a 230.801 or 230.802 transaction may be resold in the United States only if they are registered under the Act or an exemption from registration is available. (Non-GAAP C&DI Question 104.06). Similarly, the rules will enable U.S. security holders to have the opportunity to purchase shares at a possible discount from market price in cross-border rights offerings. Accordingly, the delegation is effective upon publication. By continuing to use this website, you are demonstrating your consent to the placement and use of cookies as described in our, Statement Against Anti-Asian Racism and Hate. We recently amended that definition to require companies claiming foreign private issuer status to look through certain bank, broker-dealer and other nominees to determine the residence of the nominee's client accounts.71 We likewise are adopting that modified approach for the purpose of determining the amount of securities held by U.S. holders under the new exemptive rules. 14d-1(d)) of such outstanding securities, unless: i. 16. Principal Traders, D. Exemption from the Securities Act for Exchange Offers, Business Combinations, and Rights Offerings, d. Additional Requirements for Rights Offerings, 2. The purpose of the exemptions is to facilitate U.S. investor participation in these types of transactions. Market 75 Issuers will thus have to examine the participant lists of ADR depositaries and query home country or U.S. broker-dealer or bank nominees appearing on those lists to ascertain the amount of ADRs held by U.S. investors. In many cases, foreign jurisdictions will not allow the bidder to offer U.S. holders cash when that option is not provided in all other jurisdictions. Security holders will thus have the opportunity to make informed investment decisions, particularly since the transactions relate to potential changes in control. The 1998 Internet Release stated that when an offeror prominently discloses that the offer is being made to countries other than the United States and implements adequate measures reasonably designed to guard against sales to persons in the United States or to U.S. persons in an offshore Internet offer, we will not view the offer as targeted to persons in the United States or to U.S. persons and thus will not treat it as occurring in the United States for Securities Act registration purposes.
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