By: Trevor Crow, Dufford & Brown, P.C.
The Colorado Division of Securities recently issued a notice of a public hearing, which is being held to amend Rule 51-2.1.1 to exclude business brokers from the definition of “Broker-Dealer” as that term is defined under the Colorado Securities Act (C.R.S. § 11-51-201(2)).
The proposed amendment to Rule 51-2.1.1 adds a new Section B to the current rule. The new Section B is provided below. A full copy of the current Rule 51-2.1.1 is here.
Rule 51-2.1.1 “broker-dealer” as defined at section 11-51-201(2), C.R.S., does not include:
A. [This section is an exemption for Canadian residents without an office in Colorado who meet certain other requirements]
B. A person who acts as a business broker with respect to a transaction involving the offer or sale of all of the stock or other equity interests in any closely held corporation provided that such stock or other equity interest is sold to no more than one person, as that term is defined in the Act.
In general, this amendment proposes to exempt business brokers from the “broker-dealer” registration requirements under Colorado law for transactions involving the offer or sale of all of the stock or other equity interests in any “closely held corporation” provided that such stock or other equity interest is sold to no more than one person. Because the proposed Rule amendment uses the term “closely held corporation,” it seems unclear to me whether the offer and sale of all the membership interests in an LLC will void this exemption. If the intent is for the exemption to apply to sales of other entities, such as LLCs, I would recommend that Securities Division replace the term “closely held corporation.”
If you’re interested in attending the public hearing, it is scheduled for 2:00 p.m. (Denver time) on Monday, August 26, 2013 at the following location:
Colorado Department of Regulatory Agencies
Conference Room 975
1560 Broadway, 9th Floor
Denver, Colorado 80202
At the hearing, interested parties will be afforded an opportunity to submit written data, views and arguments. The Securities Commissioner may also allow oral presentations.
This article originally appeared on www.biztaxbuzz.com. It is reprinted here by permission of the author.
