Small Business Mergers, Acquisitions, Sales, and Brokerage Simplification Act of 2021
This bill exempts from securities registration requirements certain merger-and-acquisition brokers that facilitate transfer of ownership in privately held companies with earnings or revenues under a specified threshold. However, this exemption shall not apply to certain brokers, including those that provide financing related to the transfer of ownership, engage on behalf of any party in a transaction involving specified shell companies, or have been barred or suspended from association with a broker or dealer.
[Congressional Bills 117th Congress]
[From the U.S. Government Publishing Office]
[H.R. 935 Introduced in House (IH)]
<DOC>
117th CONGRESS
1st Session
H. R. 935
To amend the Securities Exchange Act of 1934 to exempt from
registration brokers performing services in connection with the
transfer of ownership of smaller privately held companies.
_______________________________________________________________________
IN THE HOUSE OF REPRESENTATIVES
February 8, 2021
Mr. Huizenga (for himself, Mr. Higgins of New York, Mr. Posey, and Mrs.
Carolyn B. Maloney of New York) introduced the following bill; which
was referred to the Committee on Financial Services
_______________________________________________________________________
A BILL
To amend the Securities Exchange Act of 1934 to exempt from
registration brokers performing services in connection with the
transfer of ownership of smaller privately held companies.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Small Business Mergers,
Acquisitions, Sales, and Brokerage Simplification Act of 2021''.
SEC. 2. REGISTRATION EXEMPTION FOR MERGER AND ACQUISITION BROKERS.
Section 15(b) of the Securities Exchange Act of 1934 (15 U.S.C.
78o(b)) is amended by adding at the end the following:
``(13) Registration exemption for merger and acquisition
brokers.--
``(A) In general.--Except as provided in
subparagraph (B), an M&A broker shall be exempt from
registration under this section.
``(B) Excluded activities.--An M&A broker is not
exempt from registration under this paragraph if such
broker does any of the following:
``(i) Directly or indirectly, in connection
with the transfer of ownership of an eligible
privately held company, receives, holds,
transmits, or has custody of the funds or
securities to be exchanged by the parties to
the transaction.
``(ii) Engages on behalf of an issuer in a
public offering of any class of securities that
is registered, or is required to be registered,
with the Commission under section 12 or with
respect to which the issuer files, or is
required to file, periodic information,
documents, and reports under subsection (d).
``(iii) Engages on behalf of any party in a
transaction involving a shell company, other
than a business combination related shell
company.
``(iv) Directly, or indirectly through any
of its affiliates, provides financing related
to the transfer of ownership of an eligible
privately held company.
``(v) Assists any party to obtain financing
from an unaffiliated third party without--
``(I) complying with all other
applicable laws in connection with such
assistance, including, if applicable,
Regulation T (12 C.F.R. 220 et seq.);
and
``(II) disclosing any compensation
in writing to the party.
``(vi) Represents both the buyer and the
seller in the same transaction without
providing clear written disclosure as to the
parties the broker represents and obtaining
written consent from both parties to the joint
representation.
``(vii) Facilitates a transaction with a
group of buyers formed with the assistance of
the M&A broker to acquire the eligible
privately held company.
``(viii) Engages in a transaction involving
the transfer of ownership of an eligible
privately held company to a passive buyer or
group of passive buyers. For purposes of the
preceding sentence, a buyer that is actively
involved in managing the acquired company is
not a passive buyer, regardless of whether such
buyer is itself owned by passive beneficial
owners.
``(ix) Binds a party to a transfer of
ownership of an eligible privately held
company.
``(C) Disqualifications.--An M&A broker is not
exempt from registration under this paragraph if such
broker is subject to--
``(i) suspension or revocation of
registration under paragraph (4);
``(ii) a statutory disqualification
described in section 3(a)(39);
``(iii) a disqualification under the rules
adopted by the Commission under section 926 of
the Investor Protection and Securities Reform
Act of 2010 (15 U.S.C. 77d note); or
``(iv) a final order described in paragraph
(4)(H).
``(D) Rule of construction.--Nothing in this
paragraph shall be construed to limit any other
authority of the Commission to exempt any person, or
any class of persons, from any provision of this title,
or from any provision of any rule or regulation
thereunder.
``(E) Definitions.--In this paragraph:
``(i) Business combination related shell
company.--The term `business combination
related shell company' means a shell company
that is formed by an entity that is not a shell
company--
``(I) solely for the purpose of
changing the corporate domicile of that
entity solely within the United States;
or
``(II) solely for the purpose of
completing a business combination
transaction (as defined under section
230.165(f) of title 17, Code of Federal
Regulations) among one or more entities
other than the company itself, none of
which is a shell company.
``(ii) Control.--The term `control' means
the power, directly or indirectly, to direct
the management or policies of a company,
whether through ownership of securities, by
contract, or otherwise. There is a presumption
of control for any person who--
``(I) is a director, general
partner, member or manager of a limited
liability company, or corporate officer
of a corporation or limited liability
company, and exercises executive
responsibility (or has similar status
or functions);
``(II) has the right to vote 25
percent or more of a class of voting
securities or the power to sell or
direct the sale of 25 percent or more
of a class of voting securities; or
``(III) in the case of a
partnership or limited liability
company, has the right to receive upon
dissolution, or has contributed, 25
percent or more of the capital.
``(iii) Eligible privately held company.--
The term `eligible privately held company'
means a privately held company that meets both
of the following conditions:
``(I) The company does not have any
class of securities registered, or
required to be registered, with the
Commission under section 12 or with
respect to which the company files, or
is required to file, periodic
information, documents, and reports
under subsection (d).
``(II) In the fiscal year ending
immediately before the fiscal year in
which the services of the M&A broker
are initially engaged with respect to
the securities transaction, the company
meets either or both of the following
conditions (determined in accordance
with the historical financial
accounting records of the company):
``(aa) The earnings of the
company before interest, taxes,
depreciation, and amortization
are less than $25,000,000.
``(bb) The gross revenues
of the company are less than
$250,000,000.
For purposes of this subclause, the
Commission may by rule modify the
dollar figures if the Commission
determines that such a modification is
necessary or appropriate in the public
interest or for the protection of
investors.
``(iv) M&A broker.--The term `M&A broker'
means a broker, and any person associated with
a broker, engaged in the business of effecting
securities transactions solely in connection
with the transfer of ownership of an eligible
privately held company, regardless of whether
the broker acts on behalf of a seller or buyer,
through the purchase, sale, exchange, issuance,
repurchase, or redemption of, or a business
combination involving, securities or assets of
the eligible privately held company, if the
broker reasonably believes that--
``(I) upon consummation of the
transaction, any person acquiring
securities or assets of the eligible
privately held company, acting alone or
in concert, will control and, directly
or indirectly, will be active in the
management of the eligible privately
held company or the business conducted
with the assets of the eligible
privately held company; and
``(II) if any person is offered
securities in exchange for securities
or assets of the eligible privately
held company, such person will, prior
to becoming legally bound to consummate
the transaction, receive or have
reasonable access to the most recent
fiscal year-end financial statements of
the issuer of the securities as
customarily prepared by the management
of the issuer in the normal course of
operations and, if the financial
statements of the issuer are audited,
reviewed, or compiled, any related
statement by the independent
accountant, a balance sheet dated not
more than 120 days before the date of
the offer, and information pertaining
to the management, business, results of
operations for the period covered by
the foregoing financial statements, and
material loss contingencies of the
issuer.
``(v) Shell company.--The term `shell
company' means a company that at the time of a
transaction with an eligible privately held
company--
``(I) has no or nominal operations;
and
``(II) has--
``(aa) no or nominal
assets;
``(bb) assets consisting
solely of cash and cash
equivalents; or
``(cc) assets consisting of
any amount of cash and cash
equivalents and nominal other
assets.
``(F) Inflation adjustment.--
``(i) In general.--On the date that is 5
years after the date of the enactment of this
paragraph, and every 5 years thereafter, each
dollar amount in subparagraph (E)(iii)(II)
shall be adjusted by--
``(I) dividing the annual value of
the Employment Cost Index For Wages and
Salaries, Private Industry Workers (or
any successor index), as published by
the Bureau of Labor Statistics, for the
calendar year preceding the calendar
year in which the adjustment is being
made by the annual value of such index
(or successor) for the calendar year
ending December 31, 2020; and
``(II) multiplying such dollar
amount by the quotient obtained under
subclause (I).
``(ii) Rounding.--Each dollar amount
determined under clause (i) shall be rounded to
the nearest multiple of $100,000.''.
SEC. 3. EFFECTIVE DATE.
This Act and any amendment made by this Act shall take effect on
the date that is 90 days after the date of the enactment of this Act.
<all>
Introduced in House
Introduced in House
Referred to the House Committee on Financial Services.
Committee Consideration and Mark-up Session Held.
Committee Consideration and Mark-up Session Held.
Ordered to be Reported in the Nature of a Substitute (Amended) by Voice Vote.
Reported (Amended) by the Committee on Financial Services. H. Rept. 117-313.
Reported (Amended) by the Committee on Financial Services. H. Rept. 117-313.
Placed on the Union Calendar, Calendar No. 233.
Mr. Garcia (IL) moved to suspend the rules and pass the bill, as amended.
Considered under suspension of the rules. (consideration: CR H4746-4748)
DEBATE - The House proceeded with forty minutes of debate on H.R. 935.
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At the conclusion of debate, the Yeas and Nays were demanded and ordered. Pursuant to the provisions of clause 8, rule XX, the Chair announced that further proceedings on the motion would be postponed.
Considered as unfinished business. (consideration: CR H4837-4838)
Passed/agreed to in House: On motion to suspend the rules and pass the bill, as amended Agreed to by the Yeas and Nays: (2/3 required): 419 - 0 (Roll no. 158).
Roll Call #158 (House)On motion to suspend the rules and pass the bill, as amended Agreed to by the Yeas and Nays: (2/3 required): 419 - 0 (Roll no. 158). (text: 05/10/2022 CR H4746-4747)
Roll Call #158 (House)Motion to reconsider laid on the table Agreed to without objection.
Received in the Senate and Read twice and referred to the Committee on Banking, Housing, and Urban Affairs.