Rule 590-4-3-.13 - Escrow and Impoundment of Proceeds(1) In any case where securities are to be registered for sale pursuant to Section 10-5-23 of the Act, and the issuer of such securities has not had any substantial gross revenues from the sale of products or services or any substantial net income from any source for any fiscal year ended during the past three years and has not succeeded, and does not intend to succeed, to any business that has had any substantial gross revenues from the sale of products or services, or any substantial net income from any source, for any fiscal year ended during the past three years, the following shall be required as conditions to registration: (a) Except in an offering pursuant to an underwriting agreement under which no securities will be sold unless all securities to be offered are sold, pursuant to a written escrow agreement, the deposit into escrow of 100% of the proceeds from the sale of such registered securities until the amount deposited in such escrow equals or exceeds the amount referenced in the prospectus and approved by the Commissioner. 1. This escrow account shall be with a bank, trust company or other escrow agent approved by the Commissioner.2. Until the escrow account contains the specified amount, the issuer shall cause 100% of the proceeds from the sale of such registered securities to be deposited directly into this account as soon as practicable after receipt. The escrow agreement may provide for disbursement to the issuer of up to 15% of the amount deposited until the specified amount is paid in.3. The escrow agreement shall provide that if the escrow account does not contain the specified amount on the specified date no later than one year after the effective date of the registration, then all amounts contained in the escrow account, including all interest earned thereon, if any, shall be returned to the securities purchasers whose payments were deposited into the escrow account. The amount of repayment to each purchaser shall be determined by multiplying the fraction, the numerator of which is the amount of each such purchaser's payments that have been deposited into the escrow account and the denominator of which is the aggregate amount of all deposits of purchaser payments into the escrow account, by the aggregate amount contained in the escrow account immediately prior to the repayment.4. If the offering proceeds are to be used for a specific purpose, including, but not limited to, the purchase of real or personal property, the escrow agreement shall provide that, upon termination of the escrow account, the escrow funds shall be paid over to the attorney who is to handle the purchase closing.5. The escrow agreement shall provide that the funds held in escrow, when released, will be used for the specific purposes stated in the prospectus, or offering circular, filed as part of the registration statement required by the Act.6. The escrow agreement shall provide that, upon termination of the escrow account and payout of the escrow funds, the escrow agent shall notify the Commissioner of the time of disbursement and to whom the funds were disbursed.(b) The deposit in an escrow account beginning on or before the date of the registration statement's effectiveness and continuing for a period of one (1) year from the termination of the registration statement's effectiveness and any renewal thereof: 1. Any securities of the same class issued or transferred to a person who is an executive officer, director, general partner or affiliate of the issuer or to any other person authorized to sell such securities for the issuer, still beneficially owned by such person, except a dealer or limited dealer registered with the Commissioner and selling pursuant to an underwriting agreement that is disclosed in the prospectus delivered to each purchaser; or2. Any securities of the same class as the securities registered that are to be issued to any person specified in subparagraph (1)(b)1.above, at a price below the proposed offering price of such securities or for a consideration other than cash.(2) No interest in any security held in an escrow account provided for in paragraph (b) above shall be offered for sale, sold, assigned or transferred during the existence of such escrow account without the written consent of the Commissioner. The Commissioner may grant such consent when there has been a significant change of circumstances or to avoid an undue hardship, but only if he deems such consent consistent with the protection of investors.(3) If the issuer intends to use the proceeds of an offering for a specific purpose or acquisition as stated in the prospectus or offering circular, and the issuer does not fall within the provisions of paragraphs (1)(a) or (1)(b) of this Rule, then the Commissioner may require the issuer to hold the proceeds of the offering in escrow until the funds reach the amount necessary to accomplish said purpose or acquisition. Said requirement by the Commissioner shall be based upon the provisions of Section 10-5-50 of the Act for the protection of investors.(4) A final copy of any escrow agreement required by this Rule, signed by both the escrow agent and the issuer, shall be included as an exhibit to the registration statement filed with the Commissioner.(5) The requirements of this Rule may be superseded or modified in writing by the Commissioner if he or she determines that such requirements are not necessary to protect investors with respect to a particular issue of securities.Ga. Comp. R. & Regs. R. 590-4-3-.13
O.C.G.A. Secs. 10-5-5, 10-5-10, 10-5-23, 10-5-24, 10-5-53, 10-5-70, 10-5-74.
Original Rule entitled "Financial Statement Certifications" adopted. F. Dec. 21, 2004; eff. Jan. 10, 2005. Repealed: New Rule entitled "Escrow and Impoundment of Proceeds" adopted. F. Nov. 18, 2011; eff. Dec. 8, 2011.