Secondary Markets for Stock – SEC Rule 144 By Sutter Law, a San Francisco Business Law Firm

Secondary Markets for Stock – SEC Rule 144 By Sutter Law, a San Francisco Business Law Firm

Secondary Markets for Stock – SEC Rule 144 Exemptions from Liquidity Limitations For Non-Affiliates (outside investors) When an Angel Investor contributes her venture capital to San Francisco start-up companies, she most likely receives restricted securities (securities sales and offers that have not been registered with the SEC) in exchange, through a private sale with the start-up.  Section 5 of the Securities Act of 1993 states that all securities offers and sales must be registered with the SEC, or be exempt from registration.  So, if the investor decides to sell her restricted securities later on, her options are limited.  So what is an investor to do? Rule 144 is one of several exemptions from the Section 5 registration requirement, which enables investors to resell restricted securities to the public.  Technically, if an investor qualifies for the exemption, Rule 144(b) protects her from being labeled as an “underwriter” so that she may be free to resell restricted securities to the public.  So how does a San Francisco Start-up Investor (Angel Investor) qualify for exemption under Rule 144?  The requirements are based on whether the individual selling the security is a Control Person or a Non-Control Person. Holding Period.  Rule 144(d) states that investors must hold their purchased restricted securities for a specified period of time before they can resell.  The length of time depends on whether or not the company whose security you’ve purchased must report under the Securities Exchange Act of 1934.  If the company is such a “Reporting Company,” the increased transparency resulting from this obligation provides more leeway for the investor in the form of a shorter holding...
Why Incorporate in Delaware, By Sutter Law, A San Francisco Business Law Firm.

Why Incorporate in Delaware, By Sutter Law, A San Francisco Business Law Firm.

Why Incorporate in Delaware, By Sutter Law, A San Francisco Business Law Firm.  A critical question at the outset for a new San Francisco Startups is what state they should choose for incorporation.  This decision can have major implications for the advantages and rights afforded to the company as it grows.  It also has implications in attracting investors for successful fundraising.  Obviously, among fledgling companies, California is a popular choice. Nevada is also solid option for incorporation (this is why we’re seeing a surge in corporate communities in Reno and Las Vegas…think Zappos and Tesla’s battery factory).  However, the debate ultimately boils down to Delaware or not-Delaware.  And even then, there shouldn’t be much a debate.  Most startups should incorporate in Delaware. So why should San Francisco Startup founders put their babies in the hands of some small sliver of a state on the other coast? Because Delaware won the Race to the Bottom. It should be noted that some perks of Delaware incorporation are actually universal to every state.  Every state allows you to choose between perpetual and finite existence.  Incorporators need not be shareholders.  And every state carries a broad powers clause, which allows you to incorporate for any lawful purpose.  But what more does Delaware offer to win the race to the bottom?  Let’s examine the big ones. Interaction with the State Most importantly, Delaware has a robust and sophisticated judiciary, known as the Court of Chancery, in which only well-informed judges (not juries) hear only corporation cases.  The Chancery’s business savvy has been honed over hundreds of years and is the envy of the country. ...