Foreign companies are concerned about a requirement that they register with the SEC if they have more than 300 individual US shareholders. Buying back shares might not be the answer.
According to new US securities legislation, any non-US company with more than 300 American shareholders must register with the SEC, whether or not it is listed in the US. The company cannot then deregister even after delisting from a US stock exchange.
The low shareholder threshold, lack of a listing requirement and the size of the US market means that the Sarbanes-Oxley Act requirement will apply to many international companies. The legislation was passed to enhance corporate responsibility and combat corporate accounting fraud. The regulations come into force for non-US companies in July.
This rule has prompted much concern among non-US listed companies about compliance costs and they are checking share registers to quantify numbers of US investors. Companies are now taking action to keep these below the 300 threshold. The preferred strategy is a share buyback from US investors.
UK broadcaster ITV has led the way. The company, which was advised by international law firm Freshfields, estimates compliance cost savings of £4 million ($7.48