An issuer with equity securities that are publicly traded often seeks to use its equity securities as consideration in an acquisition of another business. If the target business is privately held, the acquirer may seek to privately place the equity securities with the owners of the target rather than registering the securities due to the lead-time required for the registration process or for other reasons. The following discussion addresses many of the securities law issues that public companies should consider when using privately placed equity as acquisition currency, including a discussion of upcoming changes in the private placement landscape precipitated by the Jumpstart Our Business Startups Act (“JOBS Act”), signed into law by President Obama on April 5, 2012.
Archives for April 2012
California Considers Legislation to Repeal its Corporate Long-Arm Statute
California Assemblyman Curt Hagman has introduced a bill in the California legislature that will, if enacted, repeal California’s corporate long-arm statute that imposes provisions of California corporate law on non-California corporations with substantial contacts in California. The bill (AB 2260) was introduced as a “spot bill” (i.e., a placeholder bill that does nothing other than identify a specific statutory provision to be amended) on February 24, 2012, and was substantially amended on March 29, 2012 to provide for the repeal of California Corporations Code Section 2115. For many private companies operating in California that organize as Delaware corporations (generally regarded as a preferred state for incorporating), Section 2115 creates uncertainty at times regarding whether California or Delaware corporate law controls. For example, when a Delaware corporation subject to Section 2115 undertakes to effect a merger, California and Delaware each impose different shareholder consent requirements and have different procedures for non-consenting shareholders to exercise dissenters’ rights, resulting in duplicative and sometimes inconsistent requirements and procedures. Similar to the impetus for the recently enacted JOBS Act, repealing Section 2115 is another example of deregulatory legislation aimed at removing hindrances to growth companies operating in California.
Division of Corporation Finance Announces Temporary Procedure for Confidential Submission of Draft Registration Statements
On April 5, 2012, shortly after President Obama signed the Jumpstart Our Business Startups (JOBS) Act into law, the Division of Corporation Finance of the Securities and Exchange Commission announced the procedure that an Emerging Growth Company (EGC) should follow for the confidential submission of its draft registration statement, as permitted under Sec. 106(a) of the JOBS Act, until the Division implements a system for electronic submission. An EGC should submit one copy of its draft registration statement in a text searchable PDF file on CD/DVD or, alternatively, submit it in paper (without staples or binding), together with a transmittal letter in which the company confirms its EGC status, to: