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New SEC Rule 147A and Related Rule Amendments Facilitate Capital Formation

The Securities and Exchange Commission (the “SEC”) has adopted new Rule 147A, an exemption from registration for intrastate offerings, and amended other exemptions for securities issued in intrastate offerings and other small offerings.  All changes are designed to assist smaller companies in raising capital. In addition to promulgating Rule 147A, the SEC amended Rule 147 to comport with new Rule 147A, increased Rule 504’s maximum offering to $5 million, and repealed Rule 505.  Rule 147A and amended Rule 147 go into effect on April 20, 2017.

Under a Rule 147A exempt offering, issuers may (i) make offers accessible across state lines (provided sales are limited to residents of the same state where the issuer is located), and (ii) be incorporated or organized outside of the state where the intrastate sale is held.

Rule 147 was amended to use the same definition of issuer’s “principal place of business” as found in Rule 147A, revising the prior use of “principal office.” Rule 147 issuers will still be required to limit all offers and sales to residents of the same state as the issuer.

The maximum offering in Rule 504 was increased from $1 million to $5 million.  Rule 504 also now precludes “bad actors” from participating in a Rule 504 offering.  Amended Rule 504 went effective January 20, 2017, and as it rendered Rule 505 functionally superfluous, the SEC repealed Rule 505, to go effective May 22, 2017.

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About this Author

John Chadd, Steptoe Johnson Law Firm, Energy Transaction and Mineral Law Attorney
Of Counsel

John Chadd focuses his practice in the areas of energy transactional and mineral title law. He advises companies, investors, and lenders on a broad spectrum of oil and gas and energy transactions including finance, acquisitions and divestitures, development and operational matters as well as general mergers and acquisitions and renewable energy projects.  He also represents companies and lenders in lending and finance transactions across a wide array of industries. 

303-389-4316
James Tartaglia, Steptoe Johnson Law Firm, Energy and Resources Attorney
Associate

Jim Tartaglia concentrates his practice in the area of energy and natural resources law.  Mr. Tartaglia regularly assists clients with a variety of their transactional needs, including due diligence, corporate and securities matters, and oil and gas lending.

303-389-4323