INTRODUCTION

Foreign Private Issuers (FPIs) seeking to access U.S. capital markets benefit from tailored exemptions under the Securities Act. This blog discusses Rules 801 and 802, which offer registration exemptions for FPIs engaging in rights offerings, exchange offers, or business combinations. These exemptions provide flexibility while ensuring transparency through disclosures to U.S. investors.

RULE 801: EXEMPTION FOR RIGHTS OFFERINGS

Rule 801 offers FPIs an exemption from SEC registration for rights offerings, enabling existing shareholders to purchase additional equity proportionally to their current holdings.

Key Conditions for Rule 801:

1. Issuer Status: Must be an FPI at the time of offering.
2. Equal Participation: U.S. holders must receive the same offer terms as other investors.
3. SEC Filings: Written documentation must be filed on Form CB in English and accompanied by Form F-X designating a U.S. agent for service of process.
4. Disclosure Requirements: Any public announcements in the home jurisdiction must also be accessible to U.S. investors.

A mandatory legend warns investors about differences in accounting standards and challenges in enforcing U.S. securities law claims in foreign jurisdictions.

RULE 802: EXEMPTION FOR EXCHANGE OFFERS AND BUSINESS COMBINATIONS

Rule 802 provides an exemption for exchange offers (tender offers involving securities) and business combinations (mergers or reorganizations) involving FPIs. Both domestic and foreign issuers may rely on Rule 802, although the exemption applies only to issuers—not their affiliates or resale transactions.

Key Conditions for Rule 802:

1. 10% Threshold: U.S. investors may not hold more than 10% of the securities in an exchange offer or the successor company in a business combination.
2. Equal Participation: U.S. investors must receive terms at least as favorable as those offered to other holders, with cash alternatives provided where necessary.
3. SEC Filing Requirements: Like Rule 801, Rule 802 requires Form CB and Form F-X filings for public disclosures.

A similar legend must accompany all informational documents, highlighting differences in international accounting standards and enforcement challenges under U.S. law.

TIER I AND TIER II TENDER OFFER RELIEF FOR FPIS

In addition to Rules 801 and 802, FPIs may benefit from Tier I and Tier II tender offer exemptions:

• Tier I Exemption: Exempts FPIs from Section 14 and Rules 13e-3 and 13e-4 requirements if U.S. investors hold less than 10% of the securities class.
• Tier II Exemption: Available for self-tender offers under Rule 13e-4 if U.S. investors hold no more than 40% of the securities class.

These tiers offer relief from certain regulatory requirements, promoting efficiency in cross-border transactions.

CONCLUSION

Rules 801 and 802 provide essential exemptions for FPIs, streamlining access to U.S. markets while safeguarding investor interests. By offering flexibility in rights offerings, exchange offers, and business combinations, the SEC promotes international investment and capital formation. However, FPIs must adhere to strict filing and disclosure requirements to maintain compliance and investor confidence.