Fairness Hearings

A fairness hearing is a procedure whereby companies desiring to exchange outstanding securities or to issue securities in a merger or acquisition transaction may make application to the Division for a determination on the fairness of the terms and conditions of the proposed exchange.

See 61-1-11.1 , Utah Code Ann. and R164-11-2 , Utah Administrative Code.

By the fairness hearing process, applicants may qualify for an exemption from federal registration of the transaction as provided by Section 3(a)(10) of the Securities Act of 1933. In many cases, this will provide a faster and more cost-effective alternative to full federal registration of the offering.

Eligible Applicants

The Division will consider a fairness hearing application for a transaction only where:

  1. Either party to the transaction is a domestic business entity formed, organized or incorporated under the laws of Utah;
  2. Either party to the transaction is a business entity whose headquarters or principal place of business is located in Utah; or
  3. Thirty percent (30%) or more of the persons to whom it is proposed to issue securities or to deliver other consideration in the exchange are persons who are Utah residents.

Applicant Requirements

An application for a fairness hearing may be made by filing with the Division:

  1. Division Form 11 - Application for Hearing for Certain Exchanges of Securities;
  2. NASAA Form U2 - Uniform Consent to Service of Process;
  3. A fee as specified in the Division's fee schedule; and
  4. Other documents as the Division may request.

Notice of the Hearing

  1. At least twenty (20) calendar days prior to the hearing, the applicant must provide written notice of the hearing, as approved by the Division, to any person to whom it is proposed to issue securities or to deliver other consideration in the proposed exchange.
  2. The notice must contain the following information:
    1. A brief statement of the facts that give rise to the hearing, including an outline of the terms and conditions of the proposed transaction;
    2. A statement of the issues to be considered at the hearing, together with the relevant statutes and rules;
    3. The time and place of the hearing as specified by the Division;
    4. The procedures for participating in the hearing by telephone or affidavit as approved by the Division; and
    5. Any other information requested by the Division.
  3. Prior to or at the hearing, the applicant must file an affidavit with the Division stating that a notice has been sent to all persons to whom it is proposed to issue securities or to deliver other consideration in the proposed exchange, including a description of how and when the notice was sent.

Hearing

  1. Within a reasonable time after the receipt of an application meeting the full requirements of Section 61-1-11.1 and Rule R164-11-2, the Division may schedule a hearing to be conducted under Subsection 61-1-11.1(2).
  2. The hearing shall be conducted by a hearing officer designated by the Director.
  3. Any interested person may attend a hearing.
  4. Any interested person may participate in the hearing by giving written notice to the Division at least two (2) days prior to the hearing, indicating such person's intention to appear and participate in the hearing. Interested persons may participate:
    1. In person;
    2. By telephone; or
    3. By affidavit.
  5. The hearing shall be recorded electronically and transcribed by the Division. The transcription costs will be assessed to the Applicant. Upon request, the Division will hire a court reporter at the requester's expense.

Findings and Order

Within a reasonable time after completion of the hearing, the Director shall issue an order pursuant to Subsection 61-1-11.1(3).

Forms

Licensing Fees

Fees