Tag Archives: Rule 144 attorney

Debt Conversions Under Rule 144(d) and Section 3(a)(9)

Securities exchanged for other securities of the same Issuer under Section 3(a)(9) will be attributed the “character” of the exchanged securities.  This concept is clear under Rule 144(d), which allows for tacking of the old security’s holding period when an Issuer’s convertible debt is exchanged for equity.

Debt Conversions into OTC Stock Under Rule 144(d)

This concept is seen whenever a Debt Holder in an OTC Markets or OTC Bulletin Board company converts a Promissory note into Common Stock.  In that instance, the old security (Promissory Note) is exchanged for the new security (Stock).

Tacking of Rule 144 Holding Period in Debt Conversions

A debt conversion is usually done by a Debt Holder when the Rule 144 holding period has already been met by the Note, so that the Debt Holder may then deposit and sell the newly converted Stock without any additional waiting.

Securities Attorney for Debt Holders in OTC Companies

Debt Holders in OTC Markets and Bulletin Board companies can contact securities lawyer Matt Stout at (410) 429-7076 or mstout@otclawyers for Rule 144 legal opinions or Section 4(a)(1) opinions based on debt conversions.

 

Rule 144(c) Current Public Information Requirement

Shareholders familiar with Rule 144 know that for the Rule 144 Six (6) Month holding period to be used, the public company’s mandatory SEC filings under the Securities Exchange Act of 1934 must be current.  When an SEC filer’s Exchange Act reports become delinquent, the One (1) Year holding period under Rule 144 applies (if the company was never a “shell”).

Affiliate Sales of Restricted Stock Using Rule 144

Is this true for Affiliates, who have filed a Form 144 with the intention of selling up to 1% of the public company’s issued and outstanding shares of common stock during a 90 day period?

Yes, the Rule 144 “current public information” requirement must be met in order for the Affiliate to sell shares under the Rule 144 safe harbor.  The public company’s filings must remain current in order to meet his requirement at the time each sale is made.

Rule 144 Attorney Drafts Affiliate Legal Opinions

Affiliates of OTC Bulletin Board and OTC Markets companies can contact Rule 144 lawyer Matt Stout for assistance with completing Form 144 and selling restricted stock at (410) 429-7076 or mstout@otclawyers.com.

 

 

 

Securities Received Pursuant to Section 1145(a) of the Bankruptcy Code

When OTC Markets and OTC Bulletin Board public companies file for Chapter 11 bankruptcy protection, shares are often awarded to creditors as part of the company’s reorganization, and in order to facilitate the settlement of claims against the company.

Are the shares received pursuant to Section 1145(a) of the Bankruptcy Code considered the same as Rule 144 restricted stock?

No. Securities received pursuant to a Bankruptcy Code proceeding under Section 1145(a) of the Bankruptcy Code are technically received in a “public offering” under Section 1145(c) of the Code.  For this reason, the shares, which are awarded by Court Order, are considered free trading, as if they were registered.

This is essentially the same rationale which allows shares received in a 3(a)(10) settlement under Court Order to be free trading, and eligible for sale with a securities lawyer’s opinion letter.

Securities Attorney Drafting Legal Opinion Letters for Stock

Shareholders receiving stock under Section 1145(a) of the Bankruptcy Code or creditors settling claims under Section 3(a)(10) can contact securities lawyer Matt Stout for the legal opinion necessary to deposit and sell their shares at (410) 429-7076 or mstout@otclawyers.com.

Voluntary Filers and the Rule 144 Current Public Information Requirement

The “current public information” requirement under Rule 144(c)(1) is what allows Shareholders of mandatory SEC filers to use the shorter Six (6) Month holding period in order to clear restricted stock.  Only current mandatory SEC filers, which are subject to the reporting requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934 (“Exchange Act”) are eligible for this Six (6) Month holding period under Rule 144.

Does the 6 Month Rule 144 Holding Period Apply to Voluntary Filers?

No. A “voluntary filer” is an SEC filer which continues to file SEC forms 10-K, 10-Q and 8-K after its S-1 Registration Statement is declared Effective by the SEC Staff, but which is not required to do so.  Voluntary Filers are not technically “subject to” the Exchange Act reporting requirements because an S-1 Registration Statement is filed under the Securities Act of 1933.

How Can a Voluntary SEC Filer Become a Mandatory Filer?

In order to become “subject to” the Exchange Act reporting requirements (and qualify for the Six (6) Month Rule 144 Holding Period), a voluntary filer must post an 8A-12G, 8A-12B or a Form 10.

What is the Rule 144 Holding Period for a Voluntary Filer?

Until doing so, the current public information requirement in Rule 144(c)(2) is applicable to voluntary filers, and along with it comes the One (1) Year Holding Period before restricted stock can be cleared for sale.

Rule 144 Lawyer for Legal Opinions to Clear Restricted Stock

OTC Bulletin Board and OTC Markets securities lawyer Matt Stout drafts Rule 144 legal opinion letters and Section 4(a)(1) opinions, and reviews documents at no cost.  Contact an experienced Rule 144 attorney at (410) 429-7076 or mstout@otclawyers.com

Pink Sheets and the Current Public Information Requirement of Rule 144(c)(2)

One of the requirements of Rule 144 is that current information about the Issuer must be publicly available before the sale.

SEC Filers Must Have Audited Financials to Be Current

For SEC reporting companies, this means that the Issuer is current in its reporting obligations under the Securities Exchange Act of 1934, which includes audited financials on forms 10-K, and 10-Q.  Without “current information” an SEC filer will be marked “delinquent” and its Shareholders will not be permitted to use the abbreviated Six (6) Month Holding Period for removing restricted legends on their OTC stock.

Non-Reporting Issuers Do Not Need Audited Financials to Be Marked Pink Current

Non-reporting companies, and voluntary SEC filers, are not eligible for the Six (6) Month holding period even if they are “current” since they are not “subject to” the Exchange Act.

For non-reporting Pink Sheets, being current under the Alternative Reporting Standard means filing an up-to-date Information and Disclosure Statement and either the latest Quarterly Report or Annual Report on OTCMarkets.com.

Together, these OTC Markets filings contain information regarding the nature of the Issuer’s business, its officers and directors, and its financial statements, similar to what would be found in a Form 211 filed under 15c211.

Non-Reporting Pink Sheets are not required to have audited financials in order to meet the current reporting requirement under Rule 144(c)(2).

Securities Attorney for OTC Bulletin Board and OTC Markets Filers

Securities lawyer Matt Stout works with public companies that are delinquent in SEC and OTC Markets filings in order to help them become “current.”   In this context, he can review or draft SEC filings and issue OTC Markets Current Information Legal Opinions for those Issuers filing on OTCIQ.   Matt Stout, securities attorney can be reached at (410) 429-7076 or mstout@otclawyers.com.

How is the Six Month Holding Period Computed under Rule 144(d)(1)(i)?

For mandatory SEC filers, the Rule 144 holding period is Six (6) Months.  This means that under Rule 144(d)(1)(i), a minimum of Six (6) Months must pass from the date restricted securities are acquired from an Issuer or from an Affiliate of the Issuer, whichever is later (the “Acquisition Date”) and any resale of the restricted securities under Rule 144 (the “Resale Date”).

What is a Mandatory SEC Filer?

The Six (6) Month holding period only applies to mandatory SEC Filers.  A mandatory SEC filer is a public company that is, and for at least the immediately prior 90 days, has been subject to the reporting requirements of Exchange Act Section 13 or 15(d).

What is the Acquisition Date for the Purposes of Rule 144?

The Acquisition Date is the date on which the restricted securities were acquired by being “paid for” or “fully earned.”  This is often much earlier than the date of a stock certificate.

How to Calculate the Rule 144 Holding Period in a Debt Conversion

For shares originating in a debt conversion, Rule 144 allows tacking onto the holding period of a Promissory Note.   In that case, the Acquisition Date would be the later of the date of Note, or the date funds were paid to the Company in the form of wire transfer or check, if the Note is evidence of a loan.   The Acquisition Date could then be years before a Notice of Conversion or a stock certificate was even issued.

How to Calculate the Rule 144 Holding Period for a Subscription Agreement

For stock purchased from the Issuer via Subscription Agreement, the Rule 144 holding period will begin on the later of the date the Subscription Agreement was countersigned, or on the date the Shareholder purchased the shares via wire transfer or check.  That is, a Shareholder cannot start the Rule 144 holding period merely by promising to buy shares by signing the Subscription Agreement–the shares must be paid for.

How to Calculate the Rule 144 Holding Period for a Consulting Agreement

For stock awarded as compensation under a Consulting Agreement, when the Rule 144 holding period would start depends on the language of the document and when the services were provided.  The shares awarded under a Consulting Agreement must be “fully earned” by providing services.

In some cases, the document itself will specify the “term” or period of time in which services are to be provided, and the rate at which a number of shares is earned.  In cases where the document was vague, confirmation from the Company’s CEO or confirmed by correspondence between the parties or Transfer Agent can be used to verify when the shares were considered “fully earned.”

Rule 144 Legal Opinions by OTC Securities Lawyer Matheau J. W. Stout, Esq.

OTC Securities attorney Matt Stout reviews documents at no cost for Shareholders seeking legal opinions under Rule 144 or Section 4(a)(1).   Shareholders who want to clear and sell restricted stock, or who want to remove the restricted legend from securities can contact OTCLawyers at (410) 429-7076 or mstout@otclawyers.com.

Rule 144 Holding Period for Voluntary SEC Filers

What is a Voluntary SEC Filer?

A “voluntary filer” in a public company which continues filing SEC reports like the 10-K, 10-Q and 8-K, after its S-1 Registration Statement becomes effective, without technically being required to do so.

For the purposes of calculating a Rule 144 holding period, Voluntary SEC filers are not considered “subject to” the filing requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934 (“Exchange Act”) because they are not obligated to file Exchange Act reports under either of those sections.

Does Having an Effective S-1 Affect the Rule 144 Holding Period?

Having an S-1 Registration Statement, which is filed under the Securities Act of 1933, rather than under the Exchange Act, does not make a filer “mandatory.”  An SEC filer goes from “voluntary” to “mandatory” by filing certain Exchange Act forms, like the 8A-12g or the Form 10 Registration Statement.   These Exchange Act forms obligate the public company to file the 10-K, 10-Q, and 8-K, by making the company “subject to” the filing requirements of Exchange Act Section 13 or 15(d).

Mandatory SEC Filers Have a Six Month Holding Period Under Rule 144

The Six (6) Month holding period requirement in Rule 144(d)(1)(i) applies only to the restricted securities of a public company that is, and has been for at least 90 days immediately prior to the sale, “subject to” the reporting requirements of Exchange Act Section 13 or 15(d).

Voluntary Filers Have a One Year Holding Period Under Rule 144

Because of this distinction, the One (1) Year holding period requirement in Rule 144(d)(1)(ii) applies to the restricted securities of voluntary filers.

Rule 144 and Section 4(a)(1) Opinion Letter Attorney Matt Stout

Shareholders in OTCQB and OTC Bulletin Board companies can contact Rule 144 and S-1 lawyer Matt Stout with questions on clearing and depositing restricted stock at (410) 429-7076 or mstout@otclawyers.com for a no cost review.

What is the Rule 144 Holding Period for Securities Exchanged under Securities Act Section 3(a)(9)?

When a Shareholder receives new securities in exchange for old securities of the same Issuer under Section 3(a)(9), the new securities received in the exchange assume the same character as the exchanged securities.

Tacking of the Holding Period is Allowed Under Section 3(a)(9) Securities Exchanges

This means that when restricted securities are exchanged, the new securities received under Section (a)(9) are also restricted, but the SEC allows tacking onto the holding period of the former securities.

Rule 144 Legal Opinion Letters by Experienced Securities Counsel

Shareholders receiving shares in 3(a)(9) exchanges can contact OTC Markets and OTC Bulletin Board securities lawyer Matt Stout for a no cost review of their exchange documents, and for the issuance of Rule 144 or Section 4(a)(1) legal opinions at (410) 429-7076 or mstout@otclawyers.com.

 

What is the Rule 144 Holding Period for a Warrant Exercise?

Rule 144 Holding Period for Cashless Warrant Exercise

If the exercise of a warrant is “cashless” then a Shareholder is allowed to tack the holding period of the warrant onto the common stock under Rule 144(d)(3)(x).  This means that as long as there is no consideration whatsoever paid in order to exercise the warrant, the holding period of the common stock will tack back to the date of the warrant itself.

Rule 144 Holding Period for Warrant Exercises Upon Payment of Cash

In contrast, if the warrant exercise is not “cashless”, then the holding period will begin on the date of the warrant exercise.

De Minimus Payments to Exercise Warrants Under Rule 144

This is true even if the payment to exercise the warrant is “de minimis.”  That is, even if the amount paid to exercise the warrant is a very tiny amount of cash, the Shareholder will be prevented from tacking the holding period of the warrant to that of the common stock under Rule 144(d)(3)(x).

No Cost Review of Documents by Rule 144 Legal Opinion Lawyer Matt Stout

Shareholders in need of Rule 144 or Section 4(a)(1) legal opinions can contact OTC Bulletin Board and OTC Markets securities attorney Matt Stout for a no cost review of documents at (410) 429-7076 or via email at mstout@otclawyers.com.

 

 

Rule 144 Holding Period and Employee Stock Options

When does the Rule 144 holding period begin for restricted stock acquired under an Employee Stock Option plan?

The Option Grant Date Does Not Start the Rule 144 Holding Period

The Rule 144 holding period does not begin on the option grant date.  The grant of an option only gives an employee the right to acquire stock in the future.  The date of the employee’s stock option grant can never be used for Rule 144 holding period purposes, even if the exercise does not require the payment of cash or other consideration to the Issuer.

The Option Exercise Date Starts the Rule 144 Holding Period

The holding period under SEC Rule 144 starts on the date the option is exercised by the employee, and, unless the exercise is “cashless”, the full payment of the exercise price is made to the Issuer.  This is intuitive, since prior to exercising the option, the employee is not at risk, and the stock has not been in any way “earned” or “paid for.”

What is the Rationale Behind the Rule 144 Holding Period for Stock Options?

The SEC Rule 144 holding period does not begin to run until until the option is exercised.   The reason behind this is that because the employee did not pay for the option grant, prior to the issuance of the restricted stock, the employee “optionee” holds no investment risk in the Issuer.

The same rationale used here is consistent with that used when restricted stock is purchased through Subscription Agreement, since the Rule 144 holding period would not begin until the date of the check or wire transfer confirmation–when the subscription was actually paid for by the investor.

Rule 144 Securities Lawyer Matt Stout

OTC securities lawyer Matt Stout drafts Rule 144 and Section 4(a)(1) legal opinions for shareholders in OTC Markets and OTC Bulletin Board companies.   Copies of certificates and supporting documentation can be sent for a no cost review via mstout@otclawyers.com.   Shareholders who wish to clear restricted stock using Rule 144 opinion letters can contact Matt Stout at (410) 429-7076.