Document type: Checklist Practice area: Corporate — Securities Regulation Jurisdiction: United States Last reviewed: 5 September 2026

Section 1 — Document assembly (before any analysis)

For each block of shares:

  • Acquisition document: subscription agreement, purchase agreement, option agreement and exercise notice, warrant and exercise notice, merger agreement, or gift instrument
  • Evidence of payment in full, with the date
  • If a note was given: the note, to determine whether it was full recourse and adequately secured, and not secured by the securities themselves
  • Certificate or book-entry statement showing the legend and issue date
  • Complete transfer history, with each transfer document
  • For each prior holder: affiliate status at the time of transfer
  • The exemption relied on at issuance
  • Board or stockholder approvals, where relevant
  • For plan issuances: the registration statement covering the plan, if any

Section 2 — Affiliate determination

  • Capitalization table and the holder's percentage
  • Board composition and the holder's relationship to each director
  • Stockholders agreement: board designation, consent, and veto rights
  • Officer or director status, current and within the past year
  • Issuer's own disclosure identifying affiliates
  • History of the holder influencing corporate decisions
  • Conclusion documented, with the basis
  • Former affiliate: treat as an affiliate for approximately three months after service ends
  • Where the question is close, treat the holder as an affiliate

Section 3 — Holding period and tacking

  • Start date: acquired from the issuer or an affiliate and fully paid for
  • Each tacking link identified, with the provision relied on:
    • Conversion or exchange of the same issuer's securities — tacks
    • Stock dividend, split, recapitalization — tacks
    • Gift — tacks from the donor
    • Trust — tacks from the settlor
    • Death — tacks from the deceased
    • Pledge — tacks from the pledgor
    • Cashless warrant exercise, if so provided from issuance — tacks
    • Cash warrant exercise — does NOT tack
    • Purchase from an affiliate — does NOT tack
    • Purchase from a non-affiliate — tacks
  • Applicable period: six months (reporting issuer, reporting for at least 90 days) or one year
  • Each link supported by a document, not a recollection

Section 4 — Disqualifier checks

  • Shell company history reviewed — has the issuer ever been a shell? If so: has it ceased to be one, is it reporting, has it filed all reports for twelve months, has it filed Form 10 information, and has one year passed since?
  • Current public information — issuer current in all required reports (other than Form 8-K) for the preceding twelve months, confirmed as of the sale date
  • Applies to: affiliates always; non-affiliates only between six and twelve months
  • Non-reporting issuer and affiliate seller: Rule 144 is effectively unavailable

Section 5 — Affiliate conditions

  • Volume: greater of 1% of outstanding shares of the class, or average weekly reported trading volume for the four calendar weeks preceding
  • Outstanding share count taken from a current source
  • Aggregation group identified: spouse and household family members, controlled entities, persons acting in concert
  • Sales in the trailing three months by all aggregated persons tallied
  • Manner of sale: brokers' transactions, market maker transactions, or riskless principal only; no solicitation; usual commission
  • Form 144 filed concurrently with the order where sales exceed 5,000 shares or $50,000 in three months
  • Section 16 matching calendar checked — every sale matches against purchases within six months
  • Understood that a 10b5-1 plan is no defense under Section 16(b)
  • Confirmed no material non-public information
  • Company pre-clearance obtained

Section 6 — The package

Seller's representation letter:

  • How and when acquired, and from whom
  • Full payment and its date
  • The tacking chain, with the basis for each link
  • Affiliate status, current and historical
  • No agreement to sell to a particular purchaser
  • Intended manner of sale
  • No material non-public information
  • Shares sold in the preceding three months by the seller and all aggregated persons

Broker's representation letter:

  • Brokers' transaction; no solicitation; usual commission; no knowledge of a distribution

Opinion:

  • Based on documents, not representations, wherever possible
  • Affiliate status analyzed independently
  • Shell company history addressed expressly
  • Issuer reporting status confirmed as of the sale date
  • Specific tacking provision identified
  • Assumptions and documents reviewed stated

Section 7 — Moving the shares

  • Package delivered to the issuer
  • Issuer instructs the transfer agent
  • Transfer agent's specific requirements confirmed in advance (medallion guarantee, instruction format, counsel review)
  • Realistic timeline: five to fifteen business days from a complete package
  • If the issuer will not instruct, cause identified and addressed (delinquency, affiliate dispute, chain of title gap, shell history, or a contract claim under a legend removal covenant)

Section 8 — When Rule 144 will not work

  • Block exceeding the volume limit → sell over multiple periods, registered secondary, or private block sale
  • Shell company history → private resale, or wait out the Form 10 information period
  • Non-reporting issuer, affiliate seller → private resale
  • Need for freely tradable shares → registration rights demand
  • Offshore sale → Regulation S exempts the transaction but leaves domestic-issuer securities restricted

Private resale conditions:

  • Purchaser sophisticated, typically accredited or institutional
  • Access to information
  • No general solicitation
  • Investment representations obtained
  • Shares remain legended
  • Buyer's holding period determined — tacks only if the seller was a non-affiliate

Section 9 — The contractual layer

Check all of these; they usually bind longer than the securities laws.

  • Lock-up agreement — term, early release triggers, hedging coverage, underwriter discretion
  • Market standoff provision in the purchase or option agreement
  • Stockholders agreement: ROFR, co-sale, board or company consent, permitted transferee limits
  • Registration rights agreement: demand and piggyback rights, suspension rights, expenses, indemnity, legend removal covenant
  • Company insider trading policy: windows, pre-clearance, prohibited transactions
  • Employment or separation agreement restrictions, forfeitures, or clawbacks
  • Existing pledge or margin arrangement

Section 10 — Issuer-side practice

  • Written legend removal procedure with defined turnaround
  • Designated opinion provider, or a published standard for accepting holder's counsel opinions
  • Issuance records retained permanently, with the exemption relied on recorded per issuance
  • Capitalization ledger reconciled annually against the transfer agent's records
  • Reporting kept current — a missed filing freezes every affiliate
  • Registration rights obligations known before a demand arrives
  • Legend removal never used as leverage in an unrelated dispute

Section 11 — Estates, gifts, and trusts

  • Gift: donee tacks the donor's period; not a sale; shares remain legended; if the donor was an affiliate, conditions apply and sales aggregate for a period
  • Trust: tacks from the settlor; an affiliate settlor generally makes the trust an affiliate
  • Death: estate and beneficiaries tack the deceased's period; if neither the estate nor the beneficiary is an affiliate, Rule 144's conditions largely do not apply — no holding period, no volume limit, no manner-of-sale condition, no Form 144
  • Exception confirmed: is the executor or a beneficiary an affiliate?
  • Letters testamentary or equivalent authority obtained
  • Transfer agent's estate requirements confirmed in writing before assembling the package — medallion guarantees and certified court documents are typical, and estate transfers routinely take weeks longer

Section 12 — Pledges and margin

  • Pledge is not a sale; pledgee tacks the pledgor's period
  • Foreclosure is a sale and needs its own exemption
  • If the pledgor was an affiliate, a foreclosure sale may be subject to the affiliate conditions — confirm before lending
  • Opinion on foreclosure-sale exemption obtained in advance
  • Issuer's acknowledgment of the pledge obtained, where required
  • Company policy on insider pledging checked
  • Margin accounts holding restricted or control securities: a broker's sale to meet a call is a sale subject to every affiliate condition, including Form 144 and Section 16(b) matching

Section 13 — Quick disqualifier scan

Run these five before doing anything else. Any "yes" changes the plan materially.

  • Has the issuer ever been a shell company?
  • Is the issuer delinquent in any periodic report?
  • Did the holder acquire from an affiliate?
  • Was any warrant exercised for cash?
  • Is the holder currently or recently an officer, director, or significant holder with governance rights?

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