What Are the Basic Concerns About Spin-Offs?
A subsidiary must register a spin-off of shares under the Securities Act if the spin-off is a “sale” of the securities by the parent. 2 Also, when a company that reports under the Exchange Act spins-off shares of a company that does not report under the Exchange Act, the spin-off raises concerns because it may: * result in an active trading market for the spun- off shares without adequate public information about their issuer; and * violate the anti-fraud provisions of the Securities Act and the Exchange Act.
