Rule 144 General Information For Affiliates

Further to our blog post about Rule 144 for non-affiliates, we would like to provide some general guidance on Rule 144 for affiliates in this post. Please note, however, that Rule 144 is complicated and this post is only intended to provide limited background information. If you intend to resell pursuant to Rule 144, we urge you to consult with a qualified professional.

Short Answer

The following short answer applies to a seller who is an affiliate of the company whose securities are to be sold, and applies only to securities of a company that is not currently a "shell company" and that has been a reporting company in the United States for at least 90 days immediately prior to the sale.

In the situation described above, Rule 144 may be available for resale by a seller if the following conditions are satisfied:

the seller owned the securities for at least six months; the company is current in its U.S. reporting obligations (other than Form 8-K reports); the volume limitation requirement must be satisfied. For example, if the company's shares trade on the OTCBB, OTCQX or OTCQB, the amount of shares sold, together with all sales of shares of the same company sold within the three months prior to the Rule 144 sale cannot exceed 1% of the outstanding shares of the company; the manner of sale limitation requirement must be satisfied. One of the permitted manners of sale is to sell the shares using a broker who (a) does no more than execute the order to sell the shares as an agent for the seller, (b) receives no more than the usual and customary broker's commission, (c) neither solicits nor arranges for the solicitation of the customers' orders to buy the shares in anticipation of or in connection with the Rule 144 sale, and (d) after reasonable inquiry is not aware of circumstances indicating that the seller is an underwriter or that the Rule 144 sale is a part of a distribution of securities of the company; and if the amount of securities to be sold in reliance upon Rule 144 during any period of three months exceeds 5,000 shares or other units or has an aggregate sale price in excess of $50,000, the seller must file a notice on Form 144 with the Securities and Exchange Commission (the "SEC") and any U.S. national securities exchange, if the securities are listed. Rule 144 cannot be used to resell securities of a "shell company". If the securities to be sold were initially issued by a shell company or a former shell company that has since ceased to be a shell company, Rule 144 can be used if:

the company is subject to the reporting requirements of section 13...