An Exemption For Foreign Subsidiary Formation

The formation of a subsidiary under the laws of a foreign country may not seem to implicate the California Corporate Securities Law. Yet, an offer and sale may occur “in this state” within the meaning of Corporations Code Section 25008. See California’s Blue Sky Law Problems for Foreign Issues and Foreign Issuers, 23 Insights 28 (July 2009) and Yes, There Is No “S” In California.

If the subsidiary is a corporation that is issuing common shares, Rule 260.105.22 may prove to be a handy exemption. The rule exempts offer and sales of common shares issued by any corporation organized under the laws of a foreign country, provided the following conditions are met:

  • After completion of the offering, 100% of the outstanding capital stock of the issuer is owned by a corporation, directly or indirectly, in its own name or in the name of nominees or other persons holding for the sole benefit of that corporation;
  • The acquiring corporation represents that the securities are purchased for its own account for investment and not with a view to, or for sale in connection with, any distribution of the shares; and
  • All of the shares are evidenced by certificates that have stamped or printed prominently on their face a legend in the form prescribed by Rule 260.141.11.

The last condition may make this exemption less attractive than others because future transfers will be subject to the limitations on transfer set forth in Rule 260.141.11.


DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Allen Matkins Leck Gamble Mallory & Natsis LLP | Attorney Advertising

Written by:


Allen Matkins Leck Gamble Mallory & Natsis LLP on:

Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:

Sign up to create your digest using LinkedIn*

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.