if a privately held DE corporation operating & owned exclusively in & by Californians is sold for over Ten Million U.S. dollars, with some of that price millions to be exact, being paid a few months later, ie. millions "financed" up front at the point of sale by way of a contract, do any SEC Act 1933 or 1934 Reporting Requirements get triggered?i.e. the fact it was over ten million purchase price?

What if a Hedge fund is purchasing the company and pays the "financed" portion down the line also--does that, ie. hedge fund involvement, trigger reporting requirements?


  • 1
    Is the company being sold or are shares in the company being sold? The 1933 act regulates the trading of securities and the 1934 act creates the Securities and Exchange Commission to regulate the securities industry. What section of either of those acts do you think may pertain to the sale of a privately held company from one party to another? (sec.gov/about/laws.shtml)
    – Dave D
    Feb 15 '17 at 20:52
  • Even an intrastate sale of a privately held company from one party to another single party is still governed by Regulation 10b-5 of the '34 Act, a fact which is quite relevant for bankruptcy law purposes and for federal court jurisdiction over cases. Stock is a company is per se a security, and any trading of securities is covered by 10b-5.
    – ohwilleke
    Feb 16 '17 at 2:48
  • company forced to be sold against 49% of shareholders in a rev triang merger-breaching our shareholder agree that said at all times a 5 man board would exist and that you could never change that clause--they went down to a 2 man board with the 3rd abstaining cuz he was buying--got a "opinion" and stole our shares in 17 days with multi million dollar bribes of 5 managers..the 2 "board" members that voted to sell were completely "interested" and were part of the bribed posse--the 5 mgrs signed equity contracts behind our backs W/ceo saying hed be gone in 1 yr-he never left-nowa multimillionaire Feb 16 '17 at 21:05

It depends. Most transactions of that scale would be structured to avoid the requirement of making a '33 Act or '34 Act filing although some exemptions do require a bare bones minimal notice of the claim of exemption to be filed with the SEC and state officials.

In General

Generally speaking, the '33 Act applies to all "public offerings" of stock that are not exempt from registration (a tricky topic discussed below).

The '34 Act requires public disclosures to be made by: (1) all banks with 1,200 or more shareholders, (2) all other kinds of companies with 500 or more shareholders, and (3) all other kinds of companies with 300-499 shareholders which have $10 million or more in total assets in any of its last three fiscal years. Disclosure starts automatically following a '33 Act offering until the '34 Act threshold is no longer met, and also applies in cases where the '34 Act filing requirement arises in the absence of a public offering subject to registration under the '33 Act.

But, a great many offerings of stock are exempt from disclosure and constitute "private offerings". The safe harbors to qualify as a private offering are mostly set forth in SEC Regulation D, 17 C.F.R. §230.501-508. Various combinations of other exemptions exist involving some mix of a limited number of investors who are not "accredited investors" and a limited dollar amount.

Essentially all offerings of less than $1 million are exempt from federal registration although they may be subject to state "blue sky laws" under Rule 504 of Regulation D.

As Applied

The transaction you describe, in which all sales of stock that are limited to accredited investors (of which Hedge Funds would be an example), regardless of the dollar amount of the transaction, are exempt from '33 Act regulation under Rule 506 of Regulation D. Some of the California specific details are described here, but basically, state regulations is coordinated with federal regulation in this area.

There is also an "intrastate offering" exemption from the '33 Act, but it is generally very narrowly defined in light of the expansive reading that has been given to the Congressional power to regulate interstate commerce.

If there are sufficiently few total shareholders in the venture (i.e. fewer than 300), it is also exempt from '34 Act filings as well.

  • Yes this "situation" was absolutely "structured" so as not to hit OVER the 10M "mark", but what has come to light is that multi million dollar bribes were contracted, in writings, w/ 5 managers in exchange for their merger "vote" with a 30 day old 75 buck DE shell in a forced Rev Tri Merger that forced all founders out for pennies. Managers signed one week before some of the founders were forced to endorse their physical securities instruments, contracts that guaranteed a 400% increase in equity "at the next resale" of the co. selling price "over 10M" tied to Apple -stole 4 months B4 Iphone Feb 16 '17 at 20:54
  • There are many causes of action in such situations, other than failure to register an offering under the '33 Act and failure to make disclosures under the '34 Act, although offering specific legal advice in this situation would go beyond the scope of this site.
    – ohwilleke
    Feb 16 '17 at 20:58

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