The SEC made amendments to Rules 144 and 145 under the Securities Act of 1933 (“33 Act"). Under Rule 144, the selling security holders must file Form 144 for sales generally. Prior to the amendments, if the securities had been held by a non-affiliate for more than two years, the non-affiliate could resell the restricted securities without regard to a Form 144. The holder could ask the issuer’s attorney for a legal opinion to lift the restricted legends.
The amendments increase the liquidity of privately sold securities and decrease the cost of capital. The amendments reduce the holding periods and resale restrictions. The amendments shorten to 6 months the holding period for restricted securities that are subject to the reporting requirements of the Securities Exchange Act of 1934 (“34 Act"). Restricted securities of issuers that are not subject to the 34 Act reporting requirements continue to be one-year holding period prior to any public resale. After the six-month holding period, non-affiliates' sales of reporting company securities will not be subject to volume limitations, manner of sale requirements or the filing of Form 144. A Form 144 filing requirement is triggered when there are 5,000 shares or $50,000 of securities within a three-month period.
Rule 145 requires registration of securities issued in business combination transactions, unless there is an exemption. Under Rule 145 affiliates of the target company in a registered stock-for-stock merger have been subject to resale restrictions even though they may stop having an affiliation with the acquiring company.
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