New SEC Staff Legal Bulletin on Legality and Tax Opinions

New SEC Staff Legal Bulletin on Legality and Tax Opinions


By: Valerie Ford Jacob, Michael J. Alter, Jeffrey Bagner, Andrew B. Barkan, Stuart H. Gelfond, Lisa A. Levy, Taylor Kiessig

On October 14, 2011, the Division of Corporation Finance of the Securities and Exchange Commission issued a staff legal bulletin (the "Legal Bulletin") that provides guidance on the legality and tax opinions required to be filed in registered offerings of securities. These opinions are commonly referred to as Exhibit 5 and Exhibit 8 opinions.  The Legal Bulletin addresses in detail the requirements for these opinions (and related consents), as well as sets forth a series of "do's" and "don'ts," including a discussion of assumptions that they deem acceptable and others that the Staff does not believe are appropriate.  In addition, the Staff provides guidance for how to deal with certain types of issuers, such as foreign entities and non-corporate entities (e.g., limited liability companies and limited partnerships), and certain types of transactions, such as shelf offerings, medium-term note programs and exchange offers.

In our experience, the Staff has been regularly commenting on the legality and tax opinions filed with registration statements in recent years, particularly focusing on the assumptions, qualifications and exceptions included therein.  Accordingly, the Legal Bulletin is long-awaited published guidance reflecting the Staff's views on the requirements for these opinions.  In many cases, a registration statement cannot be declared effective by the SEC, and usable for the sale of securities, until these opinions have been cleared by the Staff.  By following the guidelines set forth in the Legal Bulletin, issuers and their counsel may avoid time-consuming back and forth with the Staff during the registration statement review process.

The Legal Bulletin is divided into two principal parts – the first addresses legality opinions and the second addresses tax opinions.  This memorandum highlights some of the notable aspects of the Legal Bulletin.

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