Transfers of Unregistered Stock Issued as Restricted or Control Securities
Corporations will often sell securities on an unregistered basis through private placement offerings, employee stock benefit plans, and as payment for services. These are known as "restricted securities" that can only be transferred under an exemption under the Securities Act. SEC Rule 144 provides a specific exemption for restricted securities that have been held for a specified period of time and meet other criteria. That rule also provides an exemption for "control securities," or securities held by an affiliate of the issuer, such as a director or other insider in a relationship of control with the issuer.
The securities attorneys of Gottbetter & Partners, LLP, advise corporate clients, affiliates and holders of unregistered shares held as restricted or control securities. Our client service extends to the initial issuance of unregistered securities, a holder's subsequent transfer of the shares, and advice about the timing and eligibility criteria for the Rule 144 exemption necessary to allow a holder to sell unregistered shares, including those of issuers that have ever been a "shell" as defined by the securities laws.
Our law firm has extensive experience with advising corporations about the most effective ways to issue and trade securities on both a registered and unregistered basis while maintaining full compliance with SEC rules and reporting requirements. At the same time, our objective is to help clients maximize their access to capital and trading markets on efficient, flexible and cost-effective terms. Our ability to facilitate transfers of unregistered shares under the Rule 144 exemption represents an important tool for corporations that wish to issue restricted or control shares or holders that wish to sell them.
The certificate for restricted or control shares will be marked with a "restricted" legend that can only be removed by the company's transfer agent. Removing the legend from the certificate will generally require the issuer's consent supported by a legal opinion letter. G&P lawyers working with the issuer's transfer agent prepare Rule 144 opinions as part of the client service covered under a flat fee.
Understanding the Eligibility Criteria for Rule 144 Exemptions
We also advise clients about the other conditions necessary to qualify for the Rule 144 exemption: holding period considerations, adequate current information about the issuer, trading volume limitations based on outstanding shares or recent market activity, and notice of the exempt transfer to the SEC.
For more information about trading unregistered securities under Rule 144, contact Gottbetter & Partners, LLP, in New York City.
