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2019 Guide to Foreign Private Issuer status: How to preserve it and what it provides to non-US companies

Publication June 2019

A company organized outside the United States that is subject to provisions of the US federal securities laws receives substantial benefits if it qualifies as a "foreign private issuer" (an FPI).

  • Disclosure obligations and other significant obligations are imposed on a company and on the company's officers, directors and 10 percent shareholders (1) under the US Securities Act of 1933, as amended (the Securities Act) and (2) under the US Securities Exchange Act of 1934, as amended (the Exchange Act). If a company qualifies as an FPI, then the company and its officers, directors and 10 percent shareholders do not have to comply with certain of these obligations.
  • Failure to qualify as an FPI would adversely affect a company's ability to rely on Regulation S for an exemption from registration under the Securities Act for offerings and sales of equity securities conducted outside the US. Failure to qualify as an FPI could adversely affect the company's current and former officers, directors and employees by restricting their ability to resell shares that they acquire under incentive compensation plans.
  • If a company that qualifies as an FPI is the target in a tender offer or takeover bid or is a party to a merger or amalgamation, then various requirements otherwise imposed under the Securities Act or the Exchange Act may not apply under certain conditions.
  • An FPI that lists securities on a US stock exchange receives FPI accommodations under certain rules of the New York Stock Exchange (NYSE) and The Nasdaq Stock Market (NASDAQ).

This document:

  1. Explains the tests applied in determining FPI status and describes the facts that may result in a change to FPI status; these tests are important to remember, especially as a company approaches its date for determining FPI status and
  2. Discusses in greater detail various benefits of FPI status and consequences of losing it, specifically looking at certain consequences relating to:
  • Registration under the Securities Act or under the Exchange Act
  • Offerings outside the US; Regulation S and resale restrictions
  • Treatment of shares issued under incentive compensation plans
  • Communications during an offering
  • Reporting and other obligations under the Exchange Act
  • Cross-border acquisitions; dealing with US shareholders
  • Listing on a US stock exchange

 

Download the full "2019 Guide to Foreign Private Issuer status."

 


A special thanks to law clerk Steven Bovino, who works under the direct supervision of Chris Hilbert, for his assistance in preparing this content.


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