Rule 145: Mergers, Acquisitions and Recapitalizations Under the Securities Act of 1933

The most significant occurrence surrounding the adoption of Rule 145 was the repeal by the Securities and Exchange Commission of Rule 133, the conceptually deficient “no sale” rule that had perplexed commentators for years. In Rule 133, the Commission took the position that no offer or sale of a security was involved when, for example, a shareholder of a company to be acquired in a merger (an “acquired company”) voted whether to authorize the merger of the acquired company into an acquiring company (an “acquiring company”) in exchange for stock in the acquiring company. The purpose of this Article is twofold. First, the Article presents an analysis of the present status of Rule 145 as it developed through the Securities and Exchange Commission’s nearly seven hundred no-action letters. Part I analyzes how the Rule is applied to various types of transactions by issuers, and Part II analyzes the effect that Rule 145 has on resales of stock originally acquired in a transaction that fell within Rule 145. In both parts the Article suggests alternatives where interpretations of the Rule 145 are confusing, inappropriate or nonexistent. In conclusion, the Article discusses broader policy matters and suggests certain changes that the Commission should make regarding the text and development of Rule 145