The SEC’s Division of Corporation Finance has updated its compliance and disclosure interpretations under the 1933 and 1934 Acts with revisions to existing questions and answers and the addition of new Q&As. One of the revised Q&As relates to 1934 Act Section 16.

The revision to the Section 16 question relates to general guidance and presents the scenario of a company that has reincorporated from Canada to Delaware, thereby losing its foreign private issuer status. Before the reincorporation, an officer of the company purchased common shares which were sold after the reincorporation but within six months of the purchase.

The staff advised that the purchase would be subject to Section 16 and the officer would be required to file a Form 3 within 10 days of the reincorporation and a Form 4 reporting the purchase and sale of the common shares. The staff has generally held that transactions effected by officers and directors of a foreign company before the loss of foreign private issuer status are not subject to Section 16. However, this staff position has not been applicable if the loss of foreign private issuer status also involved the company’s initial registration under 1934 Act Section 12.

In this event, Rule 16a-2(a) would apply to all Section 16 transactions effected by an officer or director in the six months before the Section 12 registration. The staff explained that a reincorporation by a foreign company that causes it to lose its foreign private issuer status is analogous to a company’s initial registration of equity securities under Section 12 because the change in status was within the control of the company and insiders should have been aware of the change sufficiently in advance to consider their potential Section 16 responsibilities when buying or selling the company’s equity securities.

The new questions under Section 16 also relate to foreign issuers. Under 1934 Act Rule 3b-4(c), a foreign issuer must determine whether it is a foreign private issuer as of the last business day of its most recently completed second fiscal quarter. If a foreign issuer with securities registered under 1934 Act Section 12 does not qualify as a foreign private issuer as of the determination date, it must begin using the forms prescribed for domestic companies and complying with Section 16 on the first day of the fiscal year following the determination date.

In this situation, a Form 3 must be filed on or before the first day of the fiscal year following the determination date.

If a foreign issuer with securities registered under 1934 Act Section 12 loses its foreign private issuer status, Rule 16a-2(a) would not make transactions effected by its officers and directors before a Form 3 is due subject to Section 16 and reportable on Form 4.

If a foreign issuer that is not a foreign private issuer files its initial registration statement to register equity securities under Section 12, Rule 16a-2(a) would make transactions by its officers and directors within six months before the effectiveness of the registration statement subject to Section 16 and reportable on Form 4.

Another C&DI includes a scenario where a foreign issuer qualifies as a foreign private issuer on the last business day of its most recently completed second fiscal quarter and, shortly thereafter, it reincorporates in Delaware. The staff said the issuer may not continue to use the foreign private issuer forms and rules until it retests its foreign private issuer status on the next determination date.

A foreign issuer generally may use the foreign private issuer forms and rules until the first day of the fiscal year following the determination date on which it no longer qualifies as a foreign private issuer. That provision does not apply to domestic issuers. A U.S.-domiciled company can never be a foreign issuer or a foreign private issuer regardless of the number of U.S. shareholders it has or where its assets, business, officers or directors are located. As a successor to the foreign issuer’s reporting obligations, the Delaware corporation must immediately begin filing 1934 Act reports on domestic issuer forms.