How do you register shares issued to sellers, and when can they sell them (Rule 144, lockups)?

How can a public company issue shares to sellers without registering them?

The common route is the private-placement exemption in Section 4(a)(2) of the Securities Act, which covers an issuer's transactions that do not involve a public offering. Most small deals use Rule 506(b) of Regulation D as a safe harbor:

• There is no dollar limit.
• Sales can go to accredited investors and no more than 35 non-accredited purchasers in a 90-day period.
• Each non-accredited purchaser, alone or with a representative, must be sophisticated enough to evaluate the investment.
• No general solicitation or advertising.
• Non-accredited purchasers must receive disclosure. A reporting company can provide its latest Form 10-K, plus later reports and a description of the securities.
• The company files Form D within 15 calendar days after the first sale.

Rule 506(c) also exists for offerings with general solicitation, but every purchaser must then be accredited and verified. A seller of a private business is rarely solicited, so Rule 506(b) is the usual fit.

The shares issued are restricted. The company uses reasonable care to prevent a distribution: it asks whether the seller is buying for their own account, tells them in writing that the shares are unregistered, and puts a legend on the certificate or book entry.

When is registration required instead?

Rule 145 treats certain mergers and asset transfers that need a vote of the target's holders as offers of securities, so they must be registered or exempt. Registration is usually on Form S-4. It adds cost and SEC review time. For a private owner who sells a business to a small public holding company, my view is that the exempt route is the normal path, because the number of sellers is small. A statutory exemption such as 4(a)(2) remains available.

When can the seller sell? How does Rule 144 work?

Rule 144 is the usual way to resell restricted shares without registration.

• Holding period. Six months if the issuer has been a reporting company for at least 90 days before the sale; one year if not. Rule 144 is a safe harbor, not the only exemption, but it is the one most sellers rely on. The period runs from when the seller acquired the shares and paid for them in full.
• Current information. A reporting issuer must have filed all required reports for the previous 12 months, other than Form 8-K. A non-reporting issuer must have the specified public information available.
• Non-affiliates. A seller who is not an affiliate, and has not been one in the prior three months, has no volume or manner-of-sale limits. After one year, the current-information condition also drops away.
• Affiliates. A seller who is an affiliate of the company has more limits: sales per three months may not exceed the greatest of 1% of outstanding shares or the average weekly trading volume over the prior four weeks. Sales must go through a broker or market maker without soliciting buyers.
• Form 144. An affiliate who sells more than 5,000 shares or $50,000 in a three-month period files Form 144.

A seller who receives a large stake in a small company can become an affiliate, so ask your lawyer whether that applies before closing.

What is the Rule 144(i) shell limit?

Rule 144 is not available for an issuer that has no or nominal operations and assets, or that used to be such a shell. A former shell can fall back on Rule 144 only after it has ceased to be a shell, reports to the SEC, has filed all required reports for the prior 12 months (other than Form 8-K), and one year has passed since it filed Form 10 information. This matters most for holding companies that went public by reverse merger. Teamshares' 8-K includes Form 10 information because its SPAC was a shell, and it states that the company ceased to be a shell at closing.

What are lock-ups and leak-outs?

They are contract terms, not securities-law rules. A lock-up bars sales for a set period, even if Rule 144 would allow them. A leak-out lets the seller sell a limited amount per period, often tied to trading volume. Buyers ask for them to protect the stock price, and sellers negotiate the length and the exceptions. There is no standard period. See how sellers who take stock get liquidity.

Can the company register the shares for resale?

Yes. A registration statement can cover shares sold by holders other than the company on a continuous or delayed basis under Rule 415(a)(1)(i). Registered shares can generally be sold without waiting for a Rule 144 holding period, though a lock-up still applies. The company usually bears the cost, and the sellers' price protection depends on the contract. Teamshares' registration rights agreement requires commercially reasonable efforts to file one; an August 17, 2026 prospectus supplement to its Form S-1 resale prospectus covers 19,663,254 shares offered by selling securityholders.

What does a worked example look like?

Assumptions. A reporting holding company closes a deal on Friday, December 4, 2026, issuing 3,000,000 restricted shares to the seller. It has 40,000,000 shares outstanding and is current in its reports. The seller is an affiliate.

• Rule 144 holding period: six months, so the earliest resale is June 4, 2027.
• Lock-up of 12 months in the agreement: it ends December 4, 2027, a Saturday, so the first trading day is Monday, December 6, 2027.
• Volume cap: 1% of 40,000,000 is 400,000 shares per three months. The average weekly volume is assumed at 150,000 shares, which is lower, so 400,000 is the greater figure.
• Time to sell 3,000,000 at 400,000 per three months: 3,000,000 / 400,000 = 7.5, so eight three-month periods, about two years after the lock-up ends, if the seller stays an affiliate.

If the seller is not an affiliate, the volume cap does not apply, and the lock-up and trading volume set the pace. Registration for resale would let the seller sell after the lock-up without these limits.

Where these numbers come from: Section 4(a)(2) is from 15 U.S.C. 77d (Cornell LII copy). Rule 506 is from 17 CFR 230.506 (Cornell LII copy), Rules 502(b), (c) and (d) from 17 CFR 230.502 (Cornell LII copy) and the Form D deadline from 17 CFR 230.503 (Cornell LII copy). Rule 145 is from 17 CFR 230.145 (Cornell LII copy), Rule 415 from 17 CFR 230.415 (Cornell LII copy) and Rule 144 from 17 CFR 230.144 (Cornell LII copy). The Teamshares details are from the Teamshares Form 8-K dated June 18, 2026 and the Teamshares 424B3 prospectus supplement. The share counts and dates in the example are assumptions. Confirm with a securities lawyer.

Related questions

Does a seller have to be an accredited investor?

Not always. Rule 506(b) allows up to 35 non-accredited purchasers who meet the sophistication test, but the company must give them disclosure, which adds work. Many buyers prefer accredited sellers.

Can the seller sell right after the lock-up ends?

Only if Rule 144 or a registration allows it. A lock-up is an extra limit; it does not replace the securities-law conditions.

Do shares in a private company have the same resale path?

No. Private shares usually have no market, so Rule 144 offers little. See why sellers prefer public stock.

What comes next

See how a seller values being paid in stock in how you pay a seller with stock instead of cash.

Related articles

• How do you pay a seller with stock instead of cash?
• Why do sellers accept public stock more readily than private stock?
• How do sellers who take public stock get liquidity?
• What is Teamshares, and what does its listing mean for small-business holdcos?
• What finance team does a public holding company need?

Meraki Dealmakers is a service of Meraki Partners, LLC, an advisory firm. It is not a broker-dealer, investment adviser, business broker, law firm or accounting firm. This article is general information, not legal, tax or investment advice.