Is Your Company Exempt From Filing Paperwork With The SEC?

Many companies issue securities to raise capital for investments in future business, refinance debts, and engage in other critical financial activities. If your company is considering an offering, you may wonder how much you'll be filing paperwork with the SEC over the life of the securities.

A corporate lawyer may surprise you with the answer, though. Tale a look at why that might be the case by reading below.

Maybe One Form

Sometimes it's not always possible to sell shares or bonds and avoid filing paperwork. However, the SEC uses an exemption system to avoid drowning itself in additional filings from smaller operations.

A securities attorney can review the proposed offering and your corporate circumstances. If they determine your firm should be eligible, they may draft a Form D. This is a document that states who your company's principals are, what the business is, what the offering is, and when you want to conduct the sale. The SEC will then determine if you need to register the offering before it goes forward.

Reasons for Exemptions

A private placement is one of the most basic exemptions. An offering is a private placement if the issuer doesn't advertise the sale or make any solicitations to advance it. Likewise, you can't sell the offering to more than 35 unaccredited investors. Private placement doesn't even require a Form D. Intrastate offerings are often totally exempt, too, as are many offerings under employee benefit plans.

Crowdfunding is one of the newer exemptions. Notably, you will have to file a Form C and some reviews and reports so this isn't quite as paperwork-free.

There is also the more complex two-tiered system under Regulation A. Offerings under Regulation A are limited to $20 million in a 12-month timeframe, and you may only market them to qualified investors.

Exchange Listings

If your company is publicly traded, it's almost certain you will have to register and submit paperwork regularly. However, smaller enterprises often face lesser reporting requirements. Large corporations almost always have to file quarterly reports with the SEC, and they have to submit them on strict deadlines. A smaller business may have to report less often, and they won't have to send the filings to the SEC as soon.                  

Should You Seek an Exemption?

The main argument for seeking an exemption is to avoid the constant legal and accounting work that accompanies registration. If you're looking to cast a wide net to bring in investors, though, registration may attract a desirable level of attention. You should discuss your options with a securities law attorney to minimize headaches and maximize returns.