12.9. Transactions That Do and Don’t Require Registration: SEC Rule 145

A merger is a combination of two companies in which a target company merges with an acquiring company. SEC Rule 145 requires that a proposed merger or acquisition be registered with the SEC if it involves the sale or exchange of assets among the companies. The purpose of the rule is to protect shareholders who are offered securities in a business merger or acquisition. When security holders receive a plan requiring them to elect whether to accept a new or different security in exchange for their existing security, Rule 145 requires the merging companies to register with the SEC and deliver a prospectus to shareholders prior to their vote.

Rule 145 also requires registration for a transfer of assets, in which one corporation purchases a substantial portion of the assets of another company with its securities. Stock reclassifications, too, such as the conversion of common stock to preferred, require registration.

Mergers where the target shareholders are paid in cash and no shareholder vote is demanded do not require registering with the SEC. Stock reclassifications involving stock splits, reverse stock splits, or a change in par v