The Off-the-Shelf Guide to Foreign Private Issuer Status

A company must determine, on an annual basis, whether it qualifies as a “foreign private issuer,” as such term is defined in Rule 405 of Regulation C under the Securities Act of 1933 (Securities Act), and Rule 3b-4 under the Securities Exchange Act of 1934 (Exchange Act). Exchange Act Rule 3b-4 defines a foreign issuer as any issuer that is a foreign government, a national of any foreign country, or a corporation or other organization incorporated or organized under the laws of any foreign country, and the foreign private issuer definition excludes foreign governments. A company incorporated or organized in the U.S. therefore cannot be a foreign private issuer, regardless of the outcome of the tests described below.

The determination is made as of the last business day of the company's most recently completed second fiscal quarter. In the case of a new registrant, Exchange Act Rule 3b-4 provides that the determination is instead made as of a date within 30 days prior to the filing of the company's initial registration statement under the Securities Act or the Exchange Act. If the company determines that it no longer meets the definition of a foreign private issuer, it becomes subject to the reporting requirements for a U.S. domestic company beginning on the first day of the next fiscal year. Once a company fails to qualify, it remains unqualified unless it again meets the requirements for foreign private issuer status as of the last business day of a subsequent second fiscal quarter.

Two tests are applied to determine whether a company qualifies as a foreign private issuer. The company qualifies as a foreign private issuer if:

• 50% or less of the company’s outstanding voting securities are “held of record” by U.S. residents (Shareholder Test); or
• If more than 50% of the company’s outstanding voting securities are held by U.S. residents and none of the following three circumstances applies (Business Contacts Test):
  • the majority of its executive officers or directors are U.S. citizens or residents;
  • more than 50% of the company’s assets are located in the U.S.; or
  • the company’s business is administered principally in the U.S.

If a company determines that it satisfies the Shareholder Test, it qualifies as a foreign private issuer and need not consider the Business Contacts Test. If a company determines that over 50% of its outstanding voting securities are held by U.S. residents and therefore it does not satisfy the Shareholder Test, then the company would need to determine if any of the elements of the Business Contacts Test are met by the company.

Application of the Shareholder Test

The Shareholder Test focuses on the percentage of the company’s outstanding voting securities that are “held of record” by U.S. residents.

Voting Securities

For the purposes of applying the Shareholder Test, the company only needs to evaluate the ownership of the company’s voting securities, and for this purpose the term “voting securities” generally refers to any security that entitles the holder of the security to vote for the election of directors of the company. The term “voting security” does not include preferred securities that, by their terms, provide holders with limited voting rights for the election of directors in the event of default, unless such securities are in default and thereby entitle the holders to vote for the election of directors.

Held of Record

A company must determine whether more than 50% of its outstanding voting securities are “held of record” by U.S. residents. For purposes of this test, the company must “look through” the record ownership of brokers, dealers, banks or nominees (include the ADR depositary bank) holding securities for the accounts of their customers and determine the residency of those customers. In accordance with the rules for determining foreign private issuer status, a company need only examine voting securities held of record in three jurisdictions: the U.S.; the company’s home jurisdiction; and the primary trading market for the company’s voting securities, if different from the company’s home jurisdiction.

The company is expected to make a good faith effort to obtain the information about the beneficial ownership of the voting securities that are held of record by brokers, dealers, banks, or nominees. In making this determination, the company must:

• Review any report of beneficial ownership that holders of the voting securities have filed publicly or provided to the company;
• Consider any actual knowledge that the company has regarding the residency of any holders of the voting securities; and
• Make appropriate inquiries regarding the beneficial ownership of the voting securities held of record by the brokers, dealers, banks or nominees.

If the company is not able to obtain information about the record holders’ accounts after reasonable inquiry, including cases where the nominee’s charge for supplying this information is unreasonable, the company may rely on the presumption that such accounts are held in the principal place of business of the broker, dealer, bank or nominee.

Other than as described above, the SEC and its Staff have not provided definitive guidance regarding the inquiry that the company must undertake to look through the record ownership of the company’s voting securities.

U.S. Residents

The SEC Staff has provided limited guidance as to how a company must determine the residency status of holders of voting securities. In Securities Act Rules Corporation Finance Interpretations Question 203.18, the Staff indicates that a person who has permanent resident status in the U.S. (a Green Card holder) is presumed to be a U.S. resident. The Staff notes that other individuals without permanent resident status may also be residents of the U.S., and therefore a company should “decide what criteria it will use to determine residency and apply them consistently without changing them to achieve a desired result.” In its guidance, the Staff notes examples of factors that a company may apply, including tax residency, nationality, mailing address, physical presence, the location of a significant portion of their financial and legal relationships or immigration status.

Application of the Business Contacts Test

If more than 50% of a company’s voting securities are held of record by U.S. residents, the company’s foreign private issuer status would depend upon the business contacts that the company has with the U.S. Specifically, the company would need to consider whether:

• The majority of the company’s executive officers or the majority of the Company’s directors are U.S. citizens or residents;
• More than 50% of the company’s assets are located in the U.S.; or
• The company’s business is administered principally in the U.S.

If the company has more than 50% of its voting securities held of record by U.S. residents and any of these three factors are true, then the company would no longer qualify as a foreign private issuer.

Citizenship and Residency

Under the foreign private issuer definition, a company must determine whether a majority of its executive officers, or a majority of its directors, are either U.S. citizens or U.S. residents, analyzing each group separately for this purpose, as noted by the Staff in Securities Act Rules Corporation Finance Interpretations Question 203.19. For purposes of this analysis, the term “executive officer” is defined in Exchange Act Rule 3b-7 as follows:

The term executive officer, when used with reference to a registrant, means its president, any vice president of the registrant in charge of a principal business unit, division or function (such as sales, administration or finance), any other officer who performs a policy making function or any other person who performs similar policy making functions for the registrant. Executive officers of subsidiaries may be deemed executive officers of the registrant if they perform such policy making functions for the registrant.

An individual who holds dual citizenship in the U.S. and another country should be treated as a U.S. citizen for purposes of this analysis.

Location of Assets

For purposes of determining whether more than 50% of the company’s assets are located in the U.S., the company must consider the location of its assets, including both tangible and intangible assets. In Securities Act Rules Corporation Finance Interpretations Question 203.21, the Staff  indicates that the company must apply a reasonable methodology for determining the location and amount of its assets, or alternatively the company could utilize the geographic segment information determined in the preparation of its financial statements.

Administration of Business

A company must determine whether its business is administered principally in the U.S. To make this determination, the Staff has indicated that the Company could consider certain factors, including the locations of:

• The Company’s principal business segments or operations;
• The Company’s board and shareholders’ meetings;
• The Company’s headquarters; and
• The Company’s most influential key executives (potentially a subset of all executives).

See Division of Corporation Finance, Accessing the U.S. Capital Markets – A Brief Overview for Foreign Private Issuers (February 13, 2013).

Further, the Staff indicates in Securities Act Rules Corporation Finance Interpretations Question 203.22 that:

There is no single factor or group of factors that are determinative under this clause. The issuer must assess on a consolidated basis the location from which its officers, partners or managers primarily direct, control and coordinate the issuer’s activities.

The Staff indicates in Securities Act Rules Corporation Finance Interpretations Question 203.23 that holding an annual or special meeting of shareholders, or occasional meetings of the board of directors in the U.S., would not necessarily result in a determination that a company’s business is administered principally in the U.S.

SEC Staff Involvement in Foreign Private Issuer Determination

A company bears the burden of determining whether it satisfies the foreign private issuer definition. The Staff generally does not make its own analysis or question a company’s analysis of its foreign private issuer status, unless something comes to the Staff’s attention which indicates that the company has not applied the foreign private issuer tests correctly.

Potential Changes to the Foreign Private Issuer Definition

In June 2025, the SEC issued a concept release soliciting public comment on the definition of “foreign private issuer.” In the concept release, the SEC analyzed reporting activity by foreign private issuers, comparing the characteristics of foreign private issuers in fiscal years 2003 and 2023. The analysis focused on the number of foreign private issuers, the jurisdictions of foreign private issuers in terms of incorporation and location of headquarters and the extent to which foreign private issuers have equity securities trading in other jurisdictions.

The concept release indicates that the SEC is considering whether to revise existing thresholds in the foreign private issuer definition, such as lowering the Shareholder Test percentage or modifying the criteria for the Business Contacts Test, as well as considering other potential tests, such as meeting a minimum level of equity trading volume on non-U.S. exchanges or requiring listing on a “major foreign exchange.” The SEC requests comment on whether foreign private issuers should be incorporated or headquartered in a jurisdiction that has a robust regulatory and oversight framework as determined by the SEC, while considering whether to establish additional mutual recognition systems, such as the limited mutual recognition approach for Canadian issuers. The SEC is also evaluating whether foreign private issuers should be required to be incorporated or headquartered in a jurisdiction in which the foreign securities authority is a signatory to the IOSCO international cooperation arrangement. The comment period on the concept release closed on September 8, 2025. The SEC has not proposed amendments to the foreign private issuer definition itself.

This informational piece, which may be considered advertising under the ethical rules of certain jurisdictions, is provided on the understanding that it does not constitute the rendering of legal advice or other professional advice by Goodwin or its lawyers. Prior results do not guarantee similar outcomes.