California Corporations Code section 25142 allows companies interested in issuing securities in a merger or conducting an exchange of outstanding securities to seek a "fairness" hearing as part of its application for qualification of the offer and sale of securities. By this process, applicants may seek an exemption from federal registration as provided by Section 3(a)(10) of the Securities Act of 1933 through a state-law hearing on the fairness of the terms and conditions of the proposed issuance or exchange of securities.
California is one of only six states in the country that offer this kind of economical and equity-based review and approval process for the offer and sale of securities pursuant to a securities law. The fairness hearing process is used most often by companies for mergers and acquisition transactions. Fairness hearings provide a fast and cost-efficient alternative to federal registration, saving companies hundreds of thousands of dollars in federal registration costs. Many high-profile California companies have taken advantage of the fairness hearing process, and the Department of Corporations processes a significant volume of fairness hearings on an expedited basis.
Members of the private securities bar report that it can cost a substantial amount of money ($250,000 or more), as well as time (6 months or more), for a company to register a securities offering pursuant to federal securities laws. The fairness hearing process of the Department of Corporations allows a company to rely on an exemption from the federal registration requirements, thereby creating a significant savings in both cost and time for the business.
Fairness Hearing Results
08/29/12 – California Department of Corporations Grants Permit to Facebook for Acquisition of Instagram