Section 3(a)(10)2 of the Securities Act3 is an exemption from Securities Act registration for offers and sales of securities in specified exchange transactions.4 Before the issuer can rely on the exemption, the following conditions must be met.5 The securities must be issued in exchange for securities, claims, or property interests; they cannot be offered for cash.6
A court or authorized governmental entity7 must approve the fairness of the terms and conditions of the exchange.
The reviewing court or authorized governmental entity must:
find, before approving the transaction, that the terms and conditions of the exchange are fair to those to whom securities will be issued;8 and
be advised before the hearing that the issuer will rely on the Section 3(a)(10) exemption based on the court’s or authorized governmental entity’s approval of the transaction.
The court or authorized governmental entity must hold a hearing before approving the fairness of the terms and conditions of the transaction.
A governmental entity must be expressly authorized by law to hold the hearing, although it is not necessary that the law require the hearing.
The fairness hearing must be open to everyone to whom securities would be issued in the proposed exchange.
Adequate notice must be given to all those persons.
There cannot be any improper impediments to the appearance by those persons at the hearing.
The Section 3(a)(10) exemption is available without any action by the Division or the Commission. Issuers that are unsure of whether the exemption is available for a specific contemplated transaction may, however, seek the Division’s views by requesting a “no-action” position from the Division.
This bulletin discusses the issues that commonly arise in those “no-action” requests. The Division believes that, by making its views on these issues more widely known, issuers will better understand when the exemption is available. Also, by making the Division’s views more widely known, this bulletin should decrease those situations in which an issuer is uncertain whether the exemption is available for a contemplated transaction.
sec.gov
It is an integral and essential element of this Plan that all securities to be the issued to the holders of Allowed Claims Debtor, shall be exempt from registration under the Securities Act of 1933, as amended, pursuant to section 1145 of the Code.
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