On 19 September 2008, the U.S. Securities and Exchange Commission (the "SEC") released final rules relating to a significant revision of its regulation of cross-border business combination transactions. Although the SEC believes its existing rules, adopted in 1999 and not modified since, were successful in addressing many areas of conflict between U.S. and foreign law, it recognizes that in some instances the exemptions have not operated as optimally as intended, or have failed to address recurring conflicts of law and practice not anticipated when adopted. The rule amendments (the "2008 Amendments") apply to cross-border business combinations and rights offerings involving foreign private issuers. The 2008 Amendments implement the majority of those amendments proposed by the SEC on 6 May 2008 (the "Proposed Amendments"), but vary from the Proposed Amendments in certain respects.

The 2008 Amendments are intended to further the SEC's objective of encouraging acquirors and issuers in cross-border tender offers, business combinations and rights offerings to permit U.S. security holders to participate in these transactions in the same manner as holders outside the United States. The 2008 Amendments seek to expand and enhance the utility of the exemptions available for cross-border business combinations and rights offerings, and to address the routine exclusion of U.S. security holders by acquirors unwilling to assume the perceived burden of complying with SEC obligations, or uncertain about the application of relevant rules. The 2008 Amendments therefore codify existing staff positions and address certain new issues in three main areas, as well as various other topics:

  1. the standards for determining eligibility for Tier I or Tier II relief from full compliance with U.S. tender offer rules, including the process by which U.S. ownership levels are measured, and an alternative trading-volume test which will be available to determine eligibility in limited circumstances;
  2. the scope of the Tier II exemptions allowing compliance with home country law or practice in lieu of U.S. regulations;
  3. making purchases outside of a tender offer; and
  4. other topics and interpretive guidance.

Those interested in a full description of the various aspects of the 2008 Amendments should view our client bulletin, available here.

The Final Amendments will be effective for any transactions that commence after 8 December 2008.

The full text of the SEC's release on the adoption of the Final Amendments and the full text of the Final Amendments is available here: