RHR Highlights – Realising Securities in a Liquidation Scenario

The team at R&H Restructuring has dealt with a number of engagements where the entity entering into liquidation holds a portfolio of both listed and unlisted securities, often via subsidiary entities incorporated in the United States (U.S.) and other jurisdictions. One of the more common situations we deal with in the U.S. is where these securities have been purchased under a restrictive legend, meaning that the purchaser acquired shares in an unregistered, private sale and is not permitted to resell the asset unless the sale is exempt from the Securities and Exchange Commission‘s registration requirements as prescribed by the Securities Act of 1933. Rule 144(d) of the Securities Act 1933 is the exemption most commonly used by sellers used to liquidate restricted shareholdings. There are a number of criteria that must be met before an entity is able to sell a restricted security, the most common of which are as follows:

•  The shares must be held for a period of not less than 6 months for entities that have reporting requirements;
•  Information relating to the entity being publicly available; and
• The seller not being an affiliate of the entity to which the position relates to. In such a situation, we will work closely with our liquidation counsel to investigate the background to the security holding, with a view to our counsel providing a legal opinion to the transfer agent of the issuing entity, providing comfort that the criteria above have been met and that the seller is permitted to trade the shares on the open market.

This is just one example of our experience dealing with an entity holding securities, and our approach in each case will be determined by the specific circumstances of the appointment. R&H Restructuring has a wealth of experience in dealing with fund structures and realising securities for the interests of creditors and investors in distressed situations.