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Recapitalizations Outline

Law Outlines > Securities Regulations (Duke Cox) Outlines

This is an extract of our Recapitalizations document, which we sell as part of our Securities Regulations (Duke Cox) Outlines collection written by the top tier of Duke University School Of Law students.

The following is a more accessble plain text extract of the PDF sample above, taken from our Securities Regulations (Duke Cox) Outlines. Due to the challenges of extracting text from PDFs, it will have odd formatting:


a. For value - introduction to 2(a)(3) i. 2(a)(3) defines sale as involving "every attempt to dispose of a security for value" ? no value, no sale

1. Example: start up giving one share for each registered user. Value =
effort in registering

2. Merely providing shareholders a choice for dividend between receiving cash or stock dividend is not "for value" a. However, if the stockholders are granted a cash dividend, and then are later given the opportunity to waive their dividend for a stock dividend, that would appear to be a sale or offer to sell a security ii. Conversion of shares

1. Value given up is the preferred share ? this is a sale

2. Whether the underlying security - the security that may be acquired through conversion or the exercise of a warrant or option - must be registered depends upon when, by the instrument's terms, the holder can acquire the underlying security through conversion or exercise of the warrant or option. a. If the conversion features or the warrant's or the option's terms provide that it can be exercised immediately, two distinct securities are then being offered, so that each must be registered or qualify for an exemption from registration b. On the other hand, if by the terms of the instrument the holder cannot convert or exercise the warrant or option until some future date, the underlying security is not "offered for sale" until that future date, and the underlying security's registration is not required at the time the convertible security, warrant, or option is being offered iii. Modifying the corporation's articles of incorporation to change the rights, privileges, and preferences of each class of a corporation's stock is sale

1. It's like asking SH to give up old shares and get new shares

2. Stockholders' rights are also altered through the entity's reincorporation in a jurisdiction whose corporate law accords security holders different sets of rights than in its former corporate domicile a. HOWEVER, the SEC views this only as a change in form, not substance ?so not for value? no sale b. Shells and Spin-Offs i. Corporate spin-offs: A owns all the stocks of B. A no longer wishes to be owner of B. A distributes B shares as a property dividends pro rata among the A shareholders.

1. Datronics case: a. As the term "sale" includes a "disposition of a security," the dissemination of the new stock among Datronic's stockholders was a sale

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