On March 6, 2025, the SEC published several updates to its compliance and disclosure interpretations (“CD&I”) related to mergers and acquisitions, Form S-4 and tender offers.
Rule 145(a)/Form S-4
Revised CD&Is 239.13 and 225.10 address the circumstances upon which seeking commitments for favorable votes, in advance of a merger/acquisition transaction, would be deemed an “offer or sale” of securities under Section 5, requiring either registration or an exemption from registration by the soliciting party.
Acquiring companies often seek management and principal shareholder commitments to vote in favor of a transaction as part of the negotiations associated with a merger/acquisition prior to soliciting such favorable votes from the shareholders at large such as by filing a Form S-4. The SEC recognizes that by executing these agreements, those management and shareholders have made investment decisions, prior to the transaction being presented to non-affiliate shareholders, in violation of Rule 145(a). However, the SEC also recognizes the legitimate reasons an acquiring company would require these agreements.
Accordingly, the SEC will not find a violation, or object to the registration of securities involved in a Rule 145(a) transaction, when voting agreements (lock-up of a in favor vote) have been executed where:
- The lock-up (voting) agreements involve only executive officers, directors, affiliates, founders and their family members, and holders of 5% or more of the voting equity securities of the target company;
- The persons signing the agreements collectively own less than 100% of the voting equity securities of the target company;
- Votes will be solicited from security holders of the target company who have not signed the agreements if such votes are needed to approve the Rule 145(a) transaction under state or foreign law; and
- The acquiring company delivers a prospectus to all security holders of the target company entitled to vote on the Rule 145(a) transaction in accordance with the Securities Act.
Where the target company insiders in the above circumstances deliver written consents approving the Rule 145(a) transaction before the Form S-4 (or Form F-4) is filed, the SEC will not object to the subsequent registration of offers and sales of the acquiring company’s securities on Form S-4 (or Form F-4) as long as:
- Target company insiders who delivered the written consents will be offered and sold securities of the acquiring company only in an offering made pursuant to a valid Securities Act exemption; and
- The securities registered on the Form S-4 (or Form F-4) will be offered and sold only to those security holders of the target company who did not deliver written consents approving the Rule 145(a) transaction.
Tender Offer Rules and Schedules
New CD&I 101.17 through 101.21 all address the application and use of the tender offer rules.
New CD&I 101.17 confirms that when completing an all cash tender offer, the amount of time the offer must remain open following a material change in disclosure, requires a facts and circumstances analysis. As a general rule, the offer should remain open for a minimum of five business days from the date the material change is disclosed. However, a shorter time period may be adequate if disclosure and dissemination of the material change allows security holders sufficient time to consider such information and factor it into their decision whether to tender shares, withdraw shares already tendered, sell into the market, or hold their shares.
New CD&I 101.18 confirms that a factual change from a partly financed or unfinanced tender offer (i.e. the offeror does not have all the cash to purchase the maximum amount of securities sought) to a fully financed tender offer (i.e. the offeror secures the cash to finance the tender offer), is material requiring the offeror to: (i) promptly disclose the change; (ii) promptly file an amendment to the Schedule TO; and (iii) promptly disseminate disclosure of the change to security holders. Upon disseminating the new disclosure, the tender offer must remain open for a sufficient period of time to allow the security holder consider such information and factor it into their decision whether to tender shares, withdraw shares already tendered, sell into the market, or hold their shares.
New CD&I 101.19 confirms that a tender offer will be considered fully financed if the offeror has secured a binding commitment letter from a lender to provide the funds necessary to purchase the maximum amount of securities sought in the offer. However, and to the contrary, a “highly confident” letter from a lender is not considered fully financed.
New CD&I 101.20 confirms that a change in source of funds (such as a different lender) in a fully financed tender offer is not in and of itself a material change to the tender offer terms. However, even though not a material change, the offer materials should be updated to disclose the new source of funds and material terms of the new financing.
New CD&I 101.21 confirms that although a change in funding source (or waiver of funding requirement) is not in and of itself a material change, a default by the funding source, shifting the offer from fully financed to either partially financed or unfinanced would be a material change. As with other material changes, the offeror would need to: (i) promptly disclose the change; (ii) promptly file an amendment to the Schedule TO; and (iii) promptly disseminate disclosure of the change to security holders. Upon disseminating the new disclosure, the tender offer must remain open for a sufficient period of time to allow the security holder consider such information and factor it into their decision whether to tender shares, withdraw shares already tendered, sell into the market, or hold their shares.
Note – for more on tender offers see – HERE.
The Author
Laura Anthony, Esq.
Founding Partner
Anthony, Linder & Cacomanolis
A Corporate and Securities Law Firm
Securities attorney Laura Anthony and her experienced legal team provide ongoing corporate counsel to small and mid-size private companies, public companies as well as private companies going public on the Nasdaq, NYSE American or over-the-counter market, such as the OTCQB and OTCQX. For more than two decades Anthony, Linder & Cacomanolis, PLLC has served clients providing fast, personalized, cutting-edge legal service. The firm’s reputation and relationships provide invaluable resources to clients including introductions to investment bankers, broker-dealers, institutional investors and other strategic alliances. The firm’s focus includes, but is not limited to, compliance with the Securities Act of 1933 offer sale and registration requirements, including private placement transactions under Regulation D and Regulation S and PIPE Transactions, securities token offerings and initial coin offerings, Regulation A/A+ offerings, as well as registration statements on Forms S-1, S-3, S-8 and merger registrations on Form S-4; compliance with the Securities Exchange Act of 1934, including registration on Form 10, reporting on Forms 10-Q, 10-K and 8-K, and 14C Information and 14A Proxy Statements; all forms of going public transactions; mergers and acquisitions including both reverse mergers and forward mergers; applications to and compliance with the corporate governance requirements of securities exchanges including Nasdaq and NYSE American; general corporate; and general contract and business transactions. Ms. Anthony and her firm represent both target and acquiring companies in merger and acquisition transactions, including the preparation of transaction documents such as merger agreements, share exchange agreements, stock purchase agreements, asset purchase agreements and reorganization agreements. The ALC legal team assists Pubcos in complying with the requirements of federal and state securities laws and SROs such as FINRA for 15c2-11 applications, corporate name changes, reverse and forward splits and changes of domicile. Ms. Anthony is also the author of SecuritiesLawBlog.com, the small-cap and middle market’s top source for industry news, and the producer and host of LawCast.com, Corporate Finance in Focus. In addition to many other major metropolitan areas, the firm currently represents clients in New York, Los Angeles, Miami, Boca Raton, West Palm Beach, Atlanta, Phoenix, Scottsdale, Charlotte, Cincinnati, Cleveland, Washington, D.C., Denver, Tampa, Detroit and Dallas.
Ms. Anthony is a member of various professional organizations including the Crowdfunding Professional Association (CfPA), Palm Beach County Bar Association, the Florida Bar Association, the American Bar Association and the ABA committees on Federal Securities Regulations and Private Equity and Venture Capital. She is a supporter of several community charities including the American Red Cross for Palm Beach and Martin Counties, Susan Komen Foundation, Opportunity, Inc., New Hope Charities, the Society of the Four Arts, the Norton Museum of Art, Palm Beach County Zoo Society, the Kravis Center for the Performing Arts and several others.
Ms. Anthony is an honors graduate from Florida State University College of Law and has been practicing law since 1993.
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