S.C. Code Regs. § § 13-207

Current through Register Vol. 48, No. 11, November 22, 2024

Section 13-207 - Fairness Hearings under 35-1-202(9)

A. To obtain a fairness hearing referenced in Section 35-1-202(9), an application for such hearing must be filed with the Securities Commissioner. The application for approval to issue securities or to deliver other consideration shall be made in compliance with subsections F through H below.

B. The Securities Commissioner or his designee shall serve as the Hearing Officer (the "Hearing Officer") and his or her authority under this regulation shall extend to the issuance or the delivery of securities or other consideration:

(1) By any entity organized under the laws of this State; or

(2) In any transaction that is subject to the registration or qualification requirements of Sections 35-1-301 through 35-1-306 and 35-1-504, or that would be so subject except for the availability of an exemption under Section 35-1-202, or by reason that the security is a federal covered security.

C. The provisions of this regulation shall be permissive only and no request for approval, failure to request approval, withdrawal of a request for approval, or denial of approval by the Hearing Officer shall affect the availability of any exemption from the registration or qualification other than the exemption available under Section 35-1-202(9), and shall not be admissible as evidence in any legal or administrative proceeding.

D. This regulation is intended to provide for a fairness hearing with respect to transactions which, if approved by the Hearing Officer, would be exempt from the registration requirements of the federal securities laws under Section 3(a)(10) of the Securities Act of 1933, or any section comparable thereto which may subsequently be enacted.

E. The applicant shall have the burden of proving the applicability of its claim for exemption under Section 35-1-202(9).

F. The application to issue securities or to deliver other consideration pursuant to Section 35-1-202(9), and all accompanying documents, shall be typed or printed and submitted to the Securities Commissioner in duplicate. The application shall be signed and dated by the applicant or by a person authorized to act on the applicant's behalf.

G. The application shall contain the following information:

(1) The names, state of incorporation or organization, and principal office address of any person proposing to issue securities or deliver other consideration in the proposed exchange;

(2) A brief description of the proposed transaction, including but not limited to a description of all parties to the transaction, all major lines of business engaged in by such parties, expected benefits of the transaction, a chronological description of the transaction to date, and a projected timetable and description of all events necessary to consummate the transaction;

(3) A list and a description of the securities or other consideration to be issued or delivered in the proposed exchange;

(4) A list and a description of the bona fide securities, claims or property interests for which the securities or other consideration referred to in subsection G(3) above are to be exchanged, including the name and state of incorporation or organization of the issuer of any such bona fide securities;

(5) A brief statement of the terms and conditions under which the securities or other consideration will be issued and exchanged or delivered and exchanged for the bona fide securities, claims or property interests;

(6) A list of the names, addresses and percentage interest owned of all persons to whom the securities will be issued or other consideration delivered in the exchange. If some or all of such persons are to receive the securities or other consideration by virtue of their ownership of shares of stock in a corporation, the applicant may comply with this requirement by submitting a list, which shows the shareholders of the corporation and the number of shares held by each shareholder as of a date not more than thirty (30) days prior to the filing of the application;

(7) A statement setting forth proposed findings of fact which the applicant requests that the Hearing Officer find and incorporate in the written decision with respect to the application;

(8) The date, which shall be within thirty (30) days of the date of filing of the application, on which the applicant requests that the hearing be held;

(9) A statement as to whether the applicant intends to rely on the exemption from federal securities registration provided for in Section 3(a)(10) of the Securities Act of 1933; and

(10) Any additional information which the applicant desires the Hearing Officer to consider. The Hearing Officer may require the applicant to submit other information in addition to the information required herein. The Hearing Officer may also waive or modify these requirements by allowing the applicant to submit less information than would otherwise be required.

H. The application shall be accompanied by the following documents:

(1) Any written agreement governing the proposed transaction;

(2) All press releases or other media announcements regarding the proposed transaction disseminated by any party to the proposed transaction;

(3) A copy of the notice of the hearing which the applicant will mail to all persons to whom the applicant proposes to issue securities or to deliver other consideration in the proposed transaction;

(4) An audited balance sheet for the preceding two fiscal years, or for the period of time of the corporation's existence if less than two years, prepared in accordance with generally accepted accounting principles, of any company whose securities will be issued or exchanged in the proposed transaction;

(5) An audited income statement for each of the preceding three fiscal years, or for the period of the corporation's existence if less than three years, prepared in accordance with generally accepted accounting principles, for the most recent fiscal year of any corporation whose securities will be issued or exchanged in the proposed transaction;

(6) All valuation or fairness opinions obtained by the parties to the transaction, including all materials supporting any parties' valuation of the securities or other consideration to be issued or exchanged in the proposed transaction;

(7) A consent to service of process as required by Section 35-1-611;

(8) A non-refundable filing fee of five thousand ($5,000.00) dollars;

(9) A written undertaking to pay, upon receipt of an invoice from the Hearing Officer, the reasonable costs incurred in conducting the fairness hearing; and

(10) Any other documents which the applicant desires the Hearing Officer to consider. The Hearing Officer may require the applicant to submit other documents in addition to the documents required herein. The Hearing Officer may also waive or modify these requirements by allowing the applicant to submit fewer documents other than those which would otherwise be required;

I. The procedure following the application shall be as follows:

(1) The Hearing Officer shall inform the applicant of any deficiencies in the application or of any additional information or documents required and may require the applicant to amend or resubmit the application prior to setting a date for the hearing;

(2) Upon the filing of a complete application, or upon any resubmitted complete application under subsection I(1) above, the Hearing Officer shall inform the applicant of the date, hour and place of the hearing, which shall be within thirty (30) days after the filing of the completed application;

(3) The applicant shall mail by United States Mail, postage prepaid, notice of such hearing to all persons to whom it is proposed to issue securities or to deliver such other consideration in such exchange, not less than ten (10) days prior to such hearing, and such notice shall be effective upon mailing. All persons to whom it is proposed to issue securities or to deliver such other consideration in such exchange have the right to appear. The applicant shall provide to the Hearing Officer, on or before the date of the hearing, a certification that the notice of hearing has been so mailed;

(4) Within ten business days after holding the hearing, the Hearing Officer shall issue his approval or a statement that his approval will not be forthcoming; and

(5) Following the conclusion of the hearing, the Hearing Officer shall transmit to the applicant an invoice for the reasonable costs incurred throughout the fairness hearing process. These costs may include, but are not limited to court reporter fees and costs, and transcript costs.

S.C. Code Regs. § 13-207

Added by State Register Volume 44, Issue No. 06, eff. 6/26/2020.