SIE: SEC Rule 145: Transactions That Do And Don’t Require Registration

SEC Rule 145: Transactions That Do and Don’t Require Registration

A merger is a combination of two companies in which a target company merges with an acquiring company. SEC Rule 145 requires that a proposed merger or acquisition be registered with the SEC if it involves the sale or exchange of assets among the companies. The purpose of the rule is to protect shareholders who are offered securities in a business merger or acquisition. When a merger requires shareholders to vote to accept new or different shares in exchange for their existing ones, Rule 145 requires the merging companies to register the new shares with the SEC and deliver a prospectus to shareholders prior to their vote.

Rule 145 also requires registration for a transfer of assets in which one corporation purchases a substantial portion of the assets of another company with its securities. Stock reclassifications, such as the conversion of common stock to preferred, also require registration.

Mergers in which the target shareholders are paid in cash and there is no shareholder vote do not require registering with the SEC. Stock reclassif