Foreign Private Issuer Status

Author:Mr Guy Lander, Bruce A. Rich and Steven J. Glusband
Profession:Carter Ledyard & Milburn
 
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The foreign integrated disclosure system of the U.S. Securities and Exchange Commission (the "SEC") makes important accommodations for foreign private issuers. Attached as Schedule A is a list of those benefits. Issuers must test their eligibility for foreign private issuer status on the last day of their second fiscal quarter, typically June 30. Set forth below are the relevant tests and related material to help you make that determination.

A. What is a Foreign Private Issuer?

A foreign private issuer ("FPI") is defined in Rule 3b-4(c) under the Securities Exchange Act of 1934 as an issuer formed or organized outside of the U.S. (other than a foreign government and its political subdivisions) that either:

has 50% or less of its outstanding voting securities held of record by U.S. residents, or has more than 50% of its outstanding voting securities held of record by U.S. residents but does not have any one of the following: a majority of its executive officers or directors are U. S. citizens or residents, or more than 50% of its assets are located in the U.S., or its business is principally administered in the U. S. B. When Foreign Private Issuer Status Is Determined

Each issuer must test its eligibility to use the forms and rules available to foreign private issuers once a year, i.e., status as a foreign private issuer is determined on the last day of its second fiscal quarter, typically June 30.

C. Counting Method: Modified "Look Through"

To determine the percentage of outstanding voting securities held by U.S. residents under the test above, the issuer must "look through" record ownership. First, the issuer must count each person identified as the owner of its securities in its shareholders of record list (maintained properly and in the ordinary course). Second, for voting securities held of record by broker-dealers, banks, depositaries (e.g., DTC) and other nominees located in: (i) the United States, and (ii) the issuer's home jurisdiction and (iii) the jurisdiction of the primary trading market for the issuer securities, the issuer must inquire and count the amount of voting securities they each hold in accounts of U.S. residents.

The issuer must make a good faith effort to obtain this information. If, after reasonable inquiry, the issuer cannot obtain information from the nominee about the amount of voting securities represented by accounts of U.S. residents, including where a nominee's charge for supplying this information would be unreasonable,...

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