The following document outlines the laws and regulations governing foreign companies that wish to access the U.S. capital markets.

The Securities Act of 1933 requires companies that offer and sell securities in the United States to register the transaction with the Securities and Exchange Commission or to follow the requirements of an exemption from the registration requirements. The Securities Exchange Act of 1934 requires companies to register classes of equity securities in order to list these securities on a national securities exchange in the United States, or if certain asset and shareholder thresholds are exceeded.  The Exchange Act also requires companies to make periodic filings with the Commission to disclose information about their business operations, financial condition and management.

Rule 405 of Regulation C under the Securities Act and Rule 3b-4 under the Exchange Act define foreign private issuer.  If a company does not qualify as a foreign private issuer, it is subject to the same registration and disclosure requirements applicable to domestic U.S. entities.  Foreign private issuers are subject to more relaxed registration and disclosure requirements.

There are two tests to determine whether a foreign company qualifies as a foreign private isssuer: the first relates to the relative degree of its U.S. share ownership, and the second relates to the level of its U.S. business contacts.

A foreign company will qualify as a foreign private issuer if 50 percent or less of its outstanding voting securities are held by U.S. residents; or if more than 50 percent of its outstanding voting securities are held by U.S. residents and none of the following three circumstances applies: the majority of its executive officers or directors are U.S. citizens or residents; more than 50 percent of the issuer's assets are located in the United States; or the issuer's business is administered principally in the United States.

For more information visit Accessing the U.S. Capital Markets — A Brief Overview for Foreign Private Issuers on the SEC website.

OUR TAKE:

Foreign private issuers are subject to more relaxed registration and disclosure requirements, but if a company does not qualify as a foreign private issuer, it is subject to the same registration and disclosure requirements applicable to domestic U.S. entities.