In this video from January 2011, I spoke about California's fairness hearing procedure. California is one of only a handful of states that offer the opportunity to take advantage of the Section 3(a)(10) exemption from registration under the Securities Act of 1933. This exemption is most typically used by public issuers who wish to acquire a closely held companies in exchange for securities. The statutory authority for the procedure is Corporations Code Section 25142.
Last Friday, the Department of Corporations announced that it will be holding a fairness hearing to consider the application by Facebook, Inc. to issue securities in connection with the proposed acquisition of Instagram, Inc. The hearing will be convened Wednesday, August 29, at 10:00 a.m. in the San Francisco Office of the Department of Corporations at One Sansome Street, 6th Floor, in the Department Hearing Room (File #: 506-3656). For more information about Facebook's application, contact Mark Leyes at the Department ((916)-322-7180).
The following resources should be helpful to those interested in the Section 3(a)(10) exemption and the California fairness hearing process:
- Securities & Exchange Commission Staff Legal Bulletin #3A
- Fairness Hearings and Shell Companies, DOC Release No. 117-C (Jan. 18, 2006)
- "Fairness" Hearings Under the Corporate Securities Law of 1968 After the Enactment of the National Securities Markets Improvement Act of 1996, DOC Release 102-C (Revised)
- W. Anthony Colbert, "Fairness Hearings," California Business Law Practitioner 44 (Spring 2010)
- Keith Paul Bishop, "California Fairness Hearings: A Low-Cost Alternative to Federal Registration in Acquisition Transactions," 15 Insights 23 (Feb. 2001)
The Department of Corporation's website provides this summary of fairness hearings from 2001 to 2007. The SEC also provides this listing of no-action letters involving Section 3(a)(10).
