What does rule 144 have to do with the rights of dissenters? | Allen Matkins


Actions that otherwise meet the California definition of “dissident actions” are not dissident actions if, immediately prior to the reorganization or simplified merger, they are listed on a national stock exchange certified by the Commissioner of Financial Protection and innovation in accordance with section 25100 (o). Cal. Company Code § 1300 (b) (1). The reason for this “exit” exception is that when a liquid trading market exists, a shareholder who is not satisfied with the proposed transaction can simply sell the shares for their shares at their fair market value. There are, however, two exceptions to this exception. Today’s article deals with one of them.

The law includes a provision to the effect that the exception does not apply to shares in respect of which there is a restriction on transfer imposed by the company or by “any law or regulation”. Shares held by companies affiliated with the issuer or which are “restricted securities” are subject to the limitations of Section 5 of the Securities Act of 1933. Rule 144 is a non-exclusive safe harbor, but it imposes various restrictions. conditions that must be met. Thus, there is a transfer restriction imposed by law (and probably controlled by the issuer). However, it would not be strictly correct to say that the restrictions are imposed by rule 144 because it is a safe harbor. The restriction is imposed by Article 5.

Finally, to fall within the scope of the “market out” exception, the law requires that the notice of meeting to shareholders summarizes articles 1300 to 1304 of the Companies Code.

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