Securities Act Release No. 5316

Exchange Act Release No. 9804

Holding Company Act Release No. 17717

Investment Company Act Release No. 7405

NOTICE OF ADOPTION OF RULES 145 and 153A, PROSPECTIVE RESCISSION OF RULE 133, AMENDMENT OF FORM S-14 UNDER THE SECURITIES ACT OF 1933, AND AMENDMENT OF RULES, 14a-2, 14a-6 AND 14c-5 UNDER THE SECURITIES EXCHANGE ACT OF 1934

The Securities and Exchange Commission today announced the adoption of Rule 145 under the Securities Act of 1933 ("Act") and several related proposals and the prospective rescission of Rule 133 under that Act. The effect of this action will be to subject transactions involving business combinations of types described in the new rule to the registration requirements of the Act. Rule 145 is designed to implement the purpose and policies underlying the Act and is based on the Commission's experience in administering Rule 133, the interpretations of and problems under that Rule, the recommendations of the Disclosure Policy Study's 1969 report, and comments received on previously proposed revisions of the rule and related proposals as published on October 9, 1969 in Securities Act Release No. 5012 and on May 2, 1972 in Securities Act Release No. 5246.

This notice contains a general discussion of the background, purpose, and general effect of the proposals to assist in a better understanding of them. However, attention is directed to the full text of the proposals included as a part of this release for a more complete understanding of their provisions. Further, the rescission of the Rule 133 and the adoption of Rule 145 should be considered in the context of and in conjunction with several other proposals which the Commission is herewith adopting or has previously adopted, including: 

1. Adoption of Rule 153A under the Act; 

2. Revision of Form S-14 under the Act; 

3. Amendment of Rule 14a-2 under the Securities Exchange Act of 1934 ("Exchange Act"); 

4. Amendment of Rule 14a-6 under the Exchange Act; 

5. Amendment of Rule 14c-5 under the Exchange Act; and 

6. Rule 144 under the Act (Release 33-5223).

Background and Purpose

Congress, in enacting the federal securities statutes, created a continuous disclosure system designed to protect investors and to assure the maintenance of fair and honest securities markets. The Commission in administering and implementing the objectives of these statutes has sought to coordinate and integrate this disclosure system, and the rescission of Rule 133 and adoption of Rule 145 and related matters are further steps in this direction.

The rescission of Rule 133 and adoption of Rule 145 are designed to implement the fundamental purposes of the Act as expressed in its preamble: 

"To provide full and fair disclosure of the character of the securities sold in interstate commerce and through the mails, and to prevent fraud in the sale thereof . . ." 

 Rule 145 is also intended to inhibit the creation of public markets in securities of issuers about which adequate current information is not available to the public. This approach is consistent with the philosophy underlying the Act, that a disclosure law provides the best protection for investors. If a security holder who is offered a new security in a Rule 145 business combination transaction has available to him the material facts about the transaction, he will be in a position to make an informed investment judgment. In order to provide such information in connection with public offerings of these securities, Rule 145 will require the filing of a registration statement with the Commission and the delivery to security holders of a prospectus containing accurate and current information concerning the proposed business combination transaction.

Explanation and Analysis

I. Rescission of Rule 133. Definition for Purposes of Section 5 of "Sale," "Offer to Sell," and "Offer for Sale." 

Rule 133 provides that for purposes only of Section 5 of the Act, the submission to a vote of stockholders of a corporation of a proposal for certain mergers, consolidations, reclassifications of securities or transfers of assets is not deemed to involve a "sale", "offer", "offer to sell", or "offer for sale" of the securities of the new or surviving corporation no the security holders of the disappearing corporation. That rule further provides that persons who are affiliates of the constituent corporation are deemed to be underwriters within the meaning of the Section 2(11) of the Act, and except for certain limited amounts cannot sell their securities in the surviving corporation without registration.

The "no-sale" theory embodied in Rule 133 is based on the rationale that the types of transactions specified in the rule are essentially corporate acts, and the volitional act on the part of the individual stockholder required for a "sale" was absent. The basis of this theory was that the exchange or alteration of the stockholder's security occurred not because he consented thereto, but because the corporate action, authorized by a specified majority of the interests affected, converted his security into a different security.

Based on the Commission's experience in administering the provisions of the Act and Rule 133 thereunder, and having given consideration to the Disclosure Policy Study Report, to the comments received on the Commission's published proposed revision of Rule 133 (Release 33-5012) and to the comments received on the proposed adoption of Rule 145 (Release 33-5246), the Commission is of the view that the "no-sale" approach embodied in Rule 133 overlooks the substance of the transactions specified therein and ignores the fundamental nature of the relationship between the stockholders and the corporation. The fact that such relationships are in part controlled by statutory provisions of the state of incorporation does not preclude as a matter of law the application of the broad concepts of "sale", "offer", "offer to sell", and "offer for sale" in Section 2(3) of the Act which are broader than the commercial or common law meanings of such terms.

Transactions of the type described in Rule 133 do not, in the Commission's opinion, occur solely by operation of law without the element of individual stockholder volition. A stockholder faced with a Rule 133 proposal must decide on his own volition whether or not the proposal is one in his own best interest. The basis on which the "no-sale" theory is predicated, namely, that the exchange of alteration of the stockholder's security occurs not because he consents thereto but because the corporation by authorized corporate action converts his securities, in the Commission's opinion, is at best only correct in a formalistic sense and overlooks the reality of the transaction. The corporate action, on which such great emphasis is placed, is derived from the individual consent given by each stockholder in voting on a proposal to merge or consolidate a business or reclassify a security. In voting, each consenting stockholder is expressing his voluntary and individual acceptance of the new security, and generally the disapproving stockholder is deferring his decision as to whether to accept the new security or, if he exercises his dissenter's rights, a cash payment. The corporate action in these circumstances, therefore, is not some type of independent fiat, but is only the aggregate effect of the voluntary decisions made by the individual stockholders to accept or reject the exchange. Formalism should no longer deprive investors of the disclosure to which they are entitled.

The Commission also is aware that Rule 133 has caused anomalous applications of the provisions of the securities laws. For example, transactions which are deemed not to involve "sales" for purposes of Section 5 of the Act, nevertheless are deemed to be "purchases" for purposes of Section 16 of the Exchange Act. Moreover, transactions which are not deemed to be "sales" for purposes of Section 5 of the Act, nevertheless are deemed to be "sales" for purposes of the anti-fraud provisions of the Act and Exchange Act and "sales" for purposes of the Public Utility Holding Company Act of 1935, the Trust Indenture Act of 1939, and the Investment Company Act of 1940.

In addition, the Commission has difficulty in reconciling Rule 133 with certain exemptive provisions of the Act. For example, Section 3(a)(9) of the Act exempts from the registration provisions of the Act the issuance of securities in a reclassification only where no commission or other remuneration is paid or given directly or indirectly for solicitation. Notwithstanding, Rule 133 in effect provides an exemption from registration for the issuance of securities in a reclassification even though a commission or other remuneration is paid for solicitation. Further, Section 3(a)(10) exempts from the registration provisions of the Act securities issued only in court or administratively supervised reorganizations. Yet Rule 133 in effect provides that securities issued in reorganizations of the type described therein are not subject to the registration provisions of the Act even though there is no judicial or administrative supervision. ¹ 

Furthermore, the Commission is aware of situations in which companies have utilized the Rule to avoid or evade the registration provisions of the Act. This has resulted in large quantities of unregistered securities being distributed to the public and has not been in the public interest or for the protection of investors.

The Commission recognizes that the "no-sale" concept has been in existence in one form or another for a long period of time, certain persons who commented on the October 9, 1969 and May 2, 1972 proposals have cited this as a reason for retaining the present Rule 133 and others have asserted that the Commission lacks the power to revise the rule. The Commission does not agree with these comments. Administrative agencies as well as courts from time to time change their interpretation of statutory provisions in the light of reexamination, new considerations, or changing conditions which indicate that earlier interpretations are no longer in keeping with the statutory objectives. The Commission believes, after a thorough reexamination of the studies and proposals cited above, that the interpretation embodied in Rule 133 is no longer consistent with the statutory objectives of the Act. The Commission's judgment is based upon a number of factors, including the observation that Rule 133 had enabled large amounts of securities to be distributed to the public without the protections afforded by the Act's registration provisions.

In view of the above, the Commission is of the opinion that transactions covered by Rule 133 involve a "sale", "offer", "offer to sell", or "offer for sale" as those terms are defined in Section 2(3) of the Act. The Commission no longer sees any persuasive reason why, as a matter of statutory construction or policy, in light of the broad remedial purposes of the Act and of public policy which strongly supports registration, this should not be the interpretative meaning.

II. Adoption of Rule 145. Reclassifications of Securities, Mergers, Consolidations and Acquisitions of Assets.

A. Preliminary Note.

A preliminary note has been added to the rule in order to provide a convenient reference to assist in understanding and interpreting its provisions.

B. Rule 145(a). Transactions Within the Rule.

Paragraph (a) of Rule 145 provides that the submission to a vote of security holders of a proposal for certain reclassifications of securities, mergers, consolidations, or transfers of assets, is deemed to involve an "offer", "offer to sell", "offer for sale", or "sale" of the securities to be issued in the transaction. The effect of the Rule is to require registration of the securities to be issued in connection with such transactions, unless an exemption from registration is available. In this regard, the purpose and effect of the Rule is the same as set forth in the releases of October 9, 1969 and May 2, 1972, to rescind Rule 133 and promulgate a rule requiring registration under the Act of the securities to be offered.

In response to comments received from the public, several textual changes have been made in Rule 145(a) as proposed. As noticed for comment, the rule by its literal language only applied to business combinations involving "corporations". Rule 133 was intended to apply to business combinations involving corporations as well as other entities, such as partnerships and real estate investment trusts. Accordingly, the rule has been revised to read "corporation or other person" in order to make clear that it applies to all issuers, without distinction as to the form of business organization. Also, the phrase "certificate of incorporation" has been revised to read "certificate of incorporation or similar controlling instruments." 

A number of comments focused upon the question of whether foreign issuers should be included within the scope of Rule 145. The Commission notes that certain provisions under the Exchange Act, and the rules promulgated thereunder, provide exemptions for foreign issuers from certain provisions of the Exchange Act (see Rules 12g3-2 and 3a12-3). Similar exemptions for foreign issuers, however, do not appear in the Securities Act, and, in the Commission's opinion, there is no statutory basis for affording such exemptions by rule. The United States securities statutes were intended to protect United States investors who buy securities of foreign issuers, and the need for the protections afforded by registration is not diminished because the issuer has a foreign domicile. ²  Accordingly, Rule 145 will apply to foreign issuers making offers or sales of securities to United States investors, unless an exemption is available under the Securities Act. While it is noted that difficulties in meeting required accounting standards may arise for foreign issuers, the Commission has authority under Regulation S-X to waive or modify accounting requirements, and, to the extent applicable, Item 15(c) under the proxy rules allows the Commission to authorize the omission or substitution of financial statements. Various other forms contain similar provisions. The staff of the Commission will be available for consultation of such matters. To clarify the applicability of Rule 145 to foreign issuers, the phrase "state of incorporation" has been changed to read "jurisdiction".

Also in response to public comments, Rule 145 has been revised to make clear that it covers transactions involving action taken upon security holder approval. The words "or consent" have been added to the word "vote" wherever it appears.

1. Rule 145(a)(1). Reclassifications.

Rule 145(a), as proposed, covered any reclassification "other than a stock split or reverse stock split which involves the substitution of a security for another security."  The rule has been revised to also exclude any reclassification which involves only a change in par value.

2. Rule 145(a)(2). Mergers or Consolidations.

Rule 145(a)(2) has been revised in three respects. The first revision adds the phrase "or similar plan of acquisition" after the words "merger or consolidation" because a number of similar transactions do not fit precisely within the terms "merger or consolidation". The second revision adds the phrase "held by such security holders" to describe those securities which will become or be exchanged for other securities. This revision is designed to clarify that in a transaction of the character described in rule 145(a), an offer occurs under the rule only as to security holders who are entitled to vote or consent to the matter, and who hold securities which become or will be exchanged for new securities. The third revision adds an exception to indicate that registration is not required where a merger or consolidation is effected solely to change an issuer's domicile.

Several commentators suggested that the applicability of Rule 145 to short-form mergers should be clarified. In certain instances, state law allows a merger of a parent and its 85 to 90 percent owned subsidiary to be consummated without shareholder approval. Because Rule 145(a) is couched in terms of offers arising in connection with a submission for the vote or consent of security holders, short-form mergers not requiring such vote or consent are not within the scope of the Rule. However, if a security is to be issued in such short-form mergers, the Commission is of the opinion that the transaction involves an "offer", "offer to sell", "offer for sale", or "sale", within the meaning of Section 2(3) of the Act, and accordingly such transactions are subject to the registration provisions of the Act unless an exemption is available.

3. Rule 145(a)(3). Transfers of Assets.

Rule 145(a)(3) has been revised to clarify those conditions under which Rule 145 is applicable to a stock for assets transaction. As revised, the rule applies only if:  (1) the matter voted upon provides for dissolution of the corporation receiving the securities; (2) the matter voted upon provides for a pro rata distribution by the corporation receiving the securities; (3) the directors of the corporation receiving the securities adopt resolutions relative to (1) or (2) within one year after the vote; or (4) a subsequent dissolution or distribution is part of a pre-existing plan for distribution. However, if the securities acquired in the transaction are distributed after one year, notwithstanding the absence of a plan, such securities must be registered unless a statutory exemption from registration is then available.

With regard to the third condition above, if the vote of the stockholders of the selling corporation is taken to authorize the sale, and the selling corporation thereafter decides to dissolve or distribute the securities within one year after the transaction, the sale of assets and the dissolution or distribution by the selling corporation are deemed to be portions of the same transaction and to involve a sale for value of the purchasing corporation's stock to the shareholders of the selling corporation. Accordingly, the transaction should be registered on Form S-14 at the time the plan or agreement for the sale of assets is submitted to shareholders for their vote or consent if it is contemplated that the corporation receiving the securities will adopt resolution within one year for dissolution or distribution of the securities received. If the transaction is not registered at the time of submission of the plan or agreement for the vote or consent of security holders, but a resolution for dissolution or distribution of the securities received is adopted within one year, the issuer should file a registration statement covering the dissolution or distribution of securities on the appropriate form other than Form S-14, unless an exemption is available.

C. Rule 145(b), Communications Note Deemed to Be a "Prospectus" or "Offer to Sell".

Notice of a proposed action or of a meeting of security holders for voting on transactions of the character specified in Rule 145 is generally sent or furnished to security holders. Because the Rule will make the registration provisions of the Act applicable to these transactions, question have been raised as to whether such notices will constitute statutory prospectuses or involve an offer for sale of a security. Paragraph (b) of Rule 145 is designed to resolve these questions by providing that any written communication which contains no more than the information specified in paragraph (b) of the Rule shall not be deemed a prospectus for purposes of Section 2(10) of the Act and shall not be deemed an "offer for sale" of the security involved for the purposes of Section 5 of the Act.

Rule 145(b) has been revised to expand the permissible information that may be included in the announcement. The revised Rule permits the identification of all parties to the transaction; a brief description of their business; a description of the basis upon which the transaction will be made; and any legend or similar statement required by federal law or state or administrative authority. Also, paragraph (b) of the Rule has been revised to indicate that the notice may take the form of a written communication "or other published statement." 

D. Rule 145(c). Persons and Parties Deemed to Be Underwriters.

Rule 145(c), as proposed, contained specific criteria designed to clarify the underwriter status of persons who acquire substantial amounts of securities in a business combination registered on Form S-14, and who desire to resell such securities. The public comments on the proposal noted legal and policy arguments against any interpretation that imposes statutory underwriter status on persons solely by virtue of their receiving more than a certain amount of securities in a business combination. In addition, technical problems were cited in the application of the percentage tests in proposed Rule 145(c), and it was suggested that underwriter's liability should not be imposed on persons who may not be in a position to perform any necessary due diligence investigation. Others described the practical and regulatory problems that would arise if banks, investment companies, arbitrageurs and others enter into a Rule 145 transaction with marketable securities, but receive securities subject to trading restrictions. Because the question of the underwriter status of persons taking substantial portions of registered offerings arises in connection with all registered offerings, the Commission believes that the matter should be dealt with in a more comprehensive manner after further study, and not just in the limited context of business combinations.

Accordingly, Rule 145(c) has been revised by deleting the quantitative standards contained in the proposal and in lieu thereof criteria patterned after those now contained in Rule 133 have been substituted. Revised paragraph (c) of the Rule provides that any party to any transaction specified in Rule 145(a), other than the issuer, or any person who is an affiliate of such party at the time any such transaction is submitted for vote or consent, who offers or sells securities acquired in such transaction, shall be deemed to be engaged in a distribution and therefore an underwriter, except with respect to the limited resales permitted pursuant to paragraph (d) of Rule 145. Moreover, from a practical standpoint, because such persons usually are in a position to verify the accuracy of information set forth in the registration statement, and usually are in a position to influence the transaction, the Commission believes that this provision is not unreasonably burdensome.

Rule 145(c) includes a definition of the term "party" with respect to the phrase "any party to any transaction specified in paragraph (a) . . ."  The term is defined to mean the corporations, business entities, or other persons, other than the issuer, whose assets or capital structure are affected by the transaction specified in paragraph (a).

The securities received in a Rule 145 transaction by persons who are neither affiliates of the acquired company nor of the acquiring company are registered securities without restriction on resale.

E. Rule 145(d). Resale Provisions for Persons and Parties Deemed Underwriters.

Rule 145(d) provides that a person or party specified in paragraph (c) shall not be deemed to be engaged in a distribution if he sells in accordance with certain provisions of Rule 144; paragraph (c) (Current Public Information); (e) (Limitation on Amount of Securities Sold); (f) (Manner of Sale); and (g) (Brokers" Transactions). This provision is designed to permit public sale by such persons or parties in ordinary trading transactions of limited quantities of securities. Such releases are permissible within successive six-month periods, but no accumulation is permitted, i.e., the person cannot skip six months and then sell an accumulated amount in the following six months.

The volume limitations of Rule 144(e) for resales of securities listed on a national securities exchange may be determined by reference to the average weekly trading volume for the four weeks preceding receipt of the order by the broker to execute the transaction. It should be noted that the holding period requirement of Rule 144(d), and the requirement to file a Form 144 pursuant to Rule 144(h) are not applicable. In addition to resales permitted by Rule 145(d), the amended Form S-14 may be used for the registration under the Act of distributions by persons or parties who are deemed underwriters.

F. Rule 145(e). Definition of "Person".

Paragraph (e) of Rule 145 provides that the term "person" in paragraphs (c) and (d) of the rule when used with reference to a person for whose account securities are to be sold, shall have the same meaning as the definition of that term in paragraph (a)(2) of Rule 144 under the Act.

III. Rule 153A. Definition of "Preceded by a Prospectus" as used in Section 5(b)(2) of the Act, in Relation to Certain Transactions Requiring Approval of Security Holders.

Rule 153A defines the phrase "preceded by a prospectus" in connection with transactions of the type subject to Rule 145. The rule has been revised in two respects. First, the word "delivery" has been substituted for the word "sending" to conform the Rule to the General Instructions in Form S-14. Second, the Rule has been revised to apply the delivery requirement when action is taken by consent.

The persons entitled to vote on or consent to a Rule 145 transaction will usually be determined either:  (1) by the fixing of a record date for shareholders so entitled or, (2) by the closing of the stock transfer records of the acquired company. The group of persons thus determined may, because of interim transfers, vary somewhat from the group of persons ultimately entitled to receive the securities issued in the transaction. Thus, Rule 153A provides that the delivery of the final prospectus to security holders entitled to vote on or consent to the transaction shall be deemed to satisfy the prospectus delivery requirements of Section 5(b)(2) of the Act.

IV. Amendments to Rules 14a2-(d), 14a-6 and 14c-5 Under the Exchange Act.

A. Rule 14a-2. Solicitations to Which Rules Apply.

Rule 14a-2(d) under the Exchange Act provides that the proxy rules do not apply to any solicitation involved in the offer or sale of securities registered under the Securities Act. This provision has been amended to provide that the exemption from the proxy rules does not apply to solicitations involved in the offer or sale of registered securities to be issued in a transaction of the character specified in new Rule 145(a) under the Securities Act.

B. Rule 14a-6. Material Required to Be Filed.

Rule 14a-6 under the Exchange Act has been amended to provide that material required to be filed under that rule shall be deemed to be so filed when it is filed on a Form S-14 under the Securities Act. Thus, material filed with the registration statement will be deemed to have been filed under the proxy rules also, without the necessity of filing copies under those rules or payment of a proxy filing fee.

C. Rule 14c-5. Filing of Information Statement.

To provide similar treatment for proxy material and information statements, an amendment to Rule 14c-5 under the Exchange Act, analogous to that to Rule 14a-6, has been adopted. That amendment provides that material filed in a Form S-14 registration statement under the Securities Act shall be deemed to satisfy the filing requirements of Regulation 14C under the Exchange Act. In such instances, there will be no information statement filing fee required.

The amendment to Rule 14c-5 is a technical change which removes registrations and reduces the filing burdens on registrants without sacrificing protection to investors. The Commission finds that the amendment need not be published for comment pursuant to the Administrative Procedure Act.

V. Amendments to Form S-14.

The Commission believes that registration of securities issued in transactions of the character specified in Rule 145 is practical and not unduly burdensome. However, the Commission is aware that registration of such securities imposes some additional burdens on issuers, and, in order to minimize these burdens to the extent feasible, particularly for small businesses, Form S-14 provides that the prospectus to be used shall consist of a proxy or information statement that meets the requirements of the Commission's proxy or information rules under Section 14 of the Exchange Act. In the case of companies subject to those rules, the filing of the registration statement on Form S-14 satisfies the requirement for filing a proxy statement and form of proxy or information statement pursuant to those rules. Thus, registration will involve little additional work on the part of the companies subject to those rules who are required to solicit votes from their security holders, because the informational requirements will be the same for both. Where a company is not subject to the proxy rules, or is subject thereto but is not required to solicit votes from its security holders, the prospectus would contain the same information that would be required by the proxy rules. In this regard, the information requirements under Section 14 of the Exchange Act are not as burdensome to small companies as are those under the Securities Act. (See the discussion of Financial Statements below).

A. Instructions to Form S-14.

The proposed amendment to Form S-14 provided that the form would be available, generally, if the prospectus were delivered 20 days prior to the meeting date, unless such period were "in conflict" with State law. That amendment has been revised to provide that, if applicable law of the jurisdiction permits the furnishing of a notice of the meeting or other action within less than the 20-day period, then compliance with such law shall be deemed to satisfy the requirement.

General Instruction A to Form S-14 has been revised to make clear that the form may be utilized for reoffers of securities issued in Rule 145(a) type transactions to persons who may be deemed underwriters and who want to distribute such securities.

General Instruction D(a) to Form S-14 has been revised to make that if one party to a Rule 145 transaction is subject to Regulation 14A or 14C as to a particular submission, and the other party is not, then the latter will not, by filing the Form S-14, be deemed to have filed materials subject to such Regulations.

 B. Financial Statements Required in Form S-14. 

Regulation 14A and 14C (Item 15(b) of Schedule 14A), and thus Form S-14, require financial statements for each specified party to the transaction "such as would currently be required in an original registration statement for registration of securities of such persons pursuant to Section 12 of the Exchange Act."  Form 10, a form for a registration under the Exchange Act, requires a certified balance sheet as of the close of the registrant's last fiscal year and certified profit and loss and source and applications of funds statements for each of the three fiscal years preceding the date of the balance sheet. Item 15(c) of Schedule 14A to the proxy rules, which also applies to information statements and to Form S-14, provides that the Commission may permit the omission or substitution of certain financial statements.

The financial statements of an acquired company not subject to the reporting provisions of the Exchange Act required to be furnished in Form S-14 will be the financial statements specified in Form 10, certified to the extent practicable. In this regard, the standard of practicability is provided by Item 15(b) of Schedule 14A to the proxy rules. If such company cannot comply with the requirements of Form 10 on an uncertified basis, then the Commission, generally, for the purposes of the requirements of Form S-44, will require the financial statements specified in Item 11, Schedule I, Form I-A under Regulation A of the Securities Act.

C. Items 2 and 6; Use of Form S-14 by Persons and Parties Deemed Underwriters. 

A question has been raised as to whether securities to be offered for resale may initially be registered on Form S-14 when the consummation of the transaction described in Rule 145(a) has not yet occurred. Such registration will be permitted if the reoffering is made upon the consummation of the transaction. An instruction has been added in view of the language of Section 6(a) of the Act that "a registration statement shall be deemed effective only as to the securities specified therein as proposed to be offered." 

Item 6(a) of Form S-14 has been revised to make clear that a post-effective amendment need not be filed in connection with a reoffering, if all requisite information is already included therein. Item 6(a) has been further revised to make clear that the undertaking relates only to reofferings to be made through the use of Form S-14.

D. Exhibits Required in Form S-14. 

In addition to exhibits relating to the Rule 145 transaction, all exhibits of Form 10 under the Exchange Act must be filed as a registration statement on Form S-14. However, in lieu of the Form 10 exhibits, an issuer may file certain exhibits required by Form S-7 under the Securities Act, if the issuer otherwise meets the requirements for use of Form S-7.

Operation of the Rules

I. Prospective Rescission of Rule 133.

Rule 133 is rescinded prospectively on and after January 1, 1973 with the following exceptions. First, the rule will continue to be available for completion or consummation of any transaction submitted before that date for vote or consent of security holders. Second, the rule will continue to be available for completion and consummation of any transaction which, before January 1, 1973, has been formally submitted for approval to any governmental regulatory agency, if such approval is required by law. Finally, Rule 133 will continue to be available for resales of securities received by persons in any transaction for which the rule is available.

II. Relationship Between Rules 133 and 144.

Rule 144 is not available for resale of securities received in a Rule 133 transaction except for securities received by persons who are or become affiliates of the issuer. Such affiliates may also resell such securities in a registered offering, a private placement, or pursuant to some other statutory exemption.

III. Relationship Between Rule 144 and Section 4(2) Business Combinations.

When the private placement exemption from registration is available under Section 4(2) of the Act for a business combination, Rule 144 may be available for securities received in such transaction. However, with respect to the holding period for such securities, the present provisions of Rule 144(d) do not allow tacking of holding periods in business combination transactions. The Commission is reconsidering this matter and may take further action in this regard by rule amendment or interpretative release in the near future.

IV. Adoption of Rule 145.

Rule 145 is adopted effective on and after January 1, 1973. The Rule applies to any transaction of the type described therein submitted for security holder vote or consent on or after that date, except that it shall not apply to any such transaction which has been formally submitted before such date to any governmental regulatory agency for approval, if such approval is required by law.

V. Registration for Transactions of the Type Specified in Rule 145.

Form S-14 is not the exclusive form available for the registration under the Act of securities to be issued in a transaction of the type specified in Rule 145. Form S-1 is available for registration of such transactions, but Forms S-7 and S-16 are not available at this time. If Form S-1 is used, the information set forth therein should generally follow the format utilized for exchange offers, including a complete description of the parties, together with pro forma information on the resulting business entity.

When a registration statement is filed on Form S-14, the staff will accord it an appropriate type of review, as described in Securities Act Release No. 5231 (February 3, 1972), and will attempt to review it with the same expediency afforded merger proxy materials.

Commission Action

The Commission, acting pursuant to the Securities Act of 1933, particularly Sections 2(3), 2(10), 2(11), 4(1), 4(3), 4(4), 5 and 19(a) thereof, hereby takes the following action: 

1)  Rules 145 and 153A are adopted, effective on and after January 1, 1973, except that Rule 145 shall not apply to transactions submitted before that date for vote or consent of security holders, nor shall it apply to transactions formally submitted before such date for approval to any governmental regulatory agency, if such approval is required by law.

2)  Rule 133 is rescinded, prospectively effective on and after January 1, 1973, except that it shall remain in effect for transactions submitted before that date for vote or consent of security holders; for transactions formally submitted before such date for approval to any governmental regulatory agency, if such approval is required by law; and for resales of securities received by persons in such transactions.

3)  Form S-14 is amended effective on and after January 1, 1973.

The Commission acting pursuant to the Securities Exchange Act of 1934, particularly Sections 14(a), 14(c) and 23(a) thereof, the Public Utility Holding Company Act of 1935, particularly Sections 12(e) and 20(a) thereof, and the Investment Company Act of 1940, particularly Sections 20(a) and 38(a) thereof, hereby takes the following action: 

Rules 14a-2, 14a-6 and 14c-5 of the Securities Exchange Act of 1934 are amended effective on and after January 1, 1973.

The Commission finds that the amendment to Rule 14c-5 under the Securities Exchange Act of 1934 is technical and removes restrictions and reduces filing burdens on registrants and accordingly further notice and other rule making procedures pursuant to the Administrative Procedure Act are not necessary.

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By the Commission.

¹  The legislative history of the Act contains the following statement with respect to this matter:

"Reorganizations carried out without such judicial supervision possess all the dangers implicit in the issuance of new securities and are, therefore, not exempt from the Act. For the same reason the provision (Section 3(a)(10)) is not broad enough to include mergers or consolidations of corporations entered into without judicial supervision."  H. R. Rep. No. 85, 73rd Cong., 1st Sess. (May 4, 1933) at p. 16.

²  Foreign issuers frequently register rights offerings under the Securities Act when they have security holders who are residents of the United States.