When Does the Rule 144 Holding Period Start for Consulting Agreements?

Under SEC Rule 144, the shareholder’s holding period begins once the shareholder has paid for the restricted stock. ┬áIn the case of receiving stock in exchange for services, like in a Consulting Agreement, the shares are “paid for” when they are considered “earned” by the Consultant.

A securities lawyer who drafts Rule 144 opinions for shareholders of OTC Markets companies will review many Consulting Agreements which are ambiguous or silent regarding the date on which the shares are considered earned by the Company.

For this reason, consultants who wish to document their proper holding period under Rule 144 should pay close attention to the language in their compensation clause.

In general, it is wise for the Consulting Agreement to specify exactly when the shares are to be considered “fully earned” under Rule 144.

This is especially true when the Consultant is signing an agreement whereby services will be provided on a monthly or annual basis, since it is not always obvious when the shares are earned, or if they are non refundable.

This compensation clause can later be referred to by the securities lawyer, the Transfer Agent, and the Broker, when it comes time to clear stock.