What is the 'Rule 147'

Rule 147 is a rule that can be used by a company to raise funds without actually registering with the Securities and Exchange Commission (SEC). This rule usually only applies to small companies that wish to raise a small amount of money without incurring the expensive fees associated with registering with the SEC.


More specifically, this rule applies to Section 3(a)11 of the Securities Act of 1933, or the intrastate offering exemption. Previously, to qualify for this exemption, the company had to meet requirements such as:

  • The company must be incorporated in the state in which it is offering the securities.
  • The company must carry out a significant portion of its business in that state, which is defined as at least 80% of its operations.
  • The company must only sell the securities to individuals residing in the state of incorporation.

Changes Made to Rule 147 to Allow for Intrastate Offerings

In 2016, Rule 147 was amended by the SEC to establish an intrastate offering exemption known as Securities Act, Rule 147A. The amended rule allows for offers of securities to be made available to out-of-state residents as well as for the exemptions to apply to issuers of securities that incorporated out-of-state.

With the changes to the rule came alterations to the requirements. To qualify for Rule 147 and Rule 147A, the company’s officers, partners, or managers must primarily direct, control and coordinate the business’s activities in-state. Sales of securities by the company must be limited to in-state residents or persons who the company reasonably believes are in-state residents. The company meets at least one of the “doing business” requirements.

Under the changes brought with the amended rule, which includes Rule 147 and Rule 147A, companies that conduct securities offerings must meet at least one of the following requirements to satisfy the doing business in-state requirement:

  • The company derived at least 80% of its consolidated gross revenues from the operation of a business or of real property located in-state or from the rendering of services in-state.
  • The company had at least 80% of its consolidated assets located in-state.
  • The company intends to use and uses at least 80% of the net proceeds from the offering towards the operation of a business or of real property in-state, the purchase of real property located in-state, or the rendering of services in-state.
  • A majority of the company’s employees are based in-state.
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