Rule 144 Merger Agreement

Rule 144 Merger Agreement – What You Need to Know

When it comes to mergers and acquisitions in the stock market, it is important to ensure legal compliance to avoid any legal repercussions. One such compliance requirement is the compliance with Rule 144 of the Securities Act of 1933. In this article, we will discuss what Rule 144 is, how it works, and how a merger agreement is impacted by it.

What is Rule 144?

Rule 144 is a regulation established by the Securities and Exchange Commission (SEC) that allows the resale of restricted and control securities, subject to certain conditions. Restricted securities are securities that are acquired through a private placement, while control securities are those held by executives, directors, and other insiders of a company.

Under Rule 144, the holder of restricted and control securities can sell them in the open market, but only after a holding period of six months or one year, depending on the issuer and the manner in which the securities were acquired. In addition, the seller must comply with certain volume limitations, which limit the amount of securities that can be sold in any three-month period.

How Does Rule 144 Impact a Merger Agreement?

A merger agreement is a contract between two companies that outlines the terms and conditions of a merger or acquisition. The agreement typically includes provisions related to the transfer of assets, the issuance of shares, and the treatment of shareholders of the target company.

When a merger involves the issuance of securities, Rule 144 comes into play. If the securities being issued or transferred are restricted or control securities, they can only be sold in compliance with Rule 144. This means that the seller must comply with the holding period and volume limitations, and file a notice with the SEC if the sale involves more than 5,000 shares or $50,000 worth of securities.

In addition, the merger agreement must include representations and warranties related to Rule 144 compliance. For example, the agreement may require the seller to provide a legal opinion regarding compliance with Rule 144, or to indemnify the buyer for any losses resulting from a violation of Rule 144.


In conclusion, compliance with Rule 144 is an important legal requirement when it comes to mergers and acquisitions in the stock market. A merger agreement that involves the issuance or transfer of restricted or control securities must comply with Rule 144, including the holding period, volume limitations, and filing requirements. It is important for companies to seek legal advice to ensure compliance with Rule 144 and to include appropriate provisions in the merger agreement to mitigate any legal risks.