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Section 25102 (f) – Securities Law Compliance if You Incorporate in California

Banner for California Department of Business Oversight, where Section 25102 (f) notices are filedWhen startups incorporate, they typically want to avoid the expense, delay and effort associated with registering the sale of their shares. In California, the most common exemption from registration is found in Corporations Code Section 25102 (f).

Section 25102 (f) says that a corporation need not register the sale of its shares if all of the following requirements are met:

  • The shares are sold to no more than 35 shareholders.
  • All purchasers have a preexisting relationship with the corporation or its officers, directors or controlling persons.
  • Each purchaser is buying shares for the purchaser’s own account and not for resale.
  • The offer and sale of the shares is not accompanied by the publication of any advertisement.

Within 15 days of when the shares are sold, the corporation must file a Limited Offering Exemption Notice with the California Department of Business Oversight. Normally this is done online. However, twice during the past year I have had to print the PDF version of the Notice and send it by postal service with a check because the online system was unavailable. (August 19, 2019 update: It appears that the PDF version of the Notice no longer can be used – I cannot find it or find reference to it.)

If sale of the securities is exempt from California registration requirements, then it may be exempt from federal registration requirements, as well.

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Dana H. Shultz, Attorney at Law  +1 510-547-0545  dana [at] danashultz [dot] com
This blog does not provide legal advice and does not create an attorney-client relationship. If you need legal advice, please contact a lawyer directly.