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Exceptions to Exchange Act Registration for Reg A and Reg CF Companies

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Companies planning on a registered public offering must acquire an “effective” registration statement or proper exemption from the SEC before offering their securities for sale. For such exempted securities (ie. Regulation D, Regulation A, Regulation CF), Section 12 of the Securities Exchange Act of 1934 (also known as the Exchange Act) requires companies to file a registration statement even in the absence of “effective” registration. Companies who have not registered their securities would trigger the requirement to register and become an exchange act reporting company if they meet either of the following conditions:

  • The company has $10 million in total assets AND a class of equity securities, like Common Stock, with 2,000+ total securityholders or 500+ unaccredited investors (Not applicable for banks, bank holding companies, and savings and loan holding companies
  • The company’s securities are listed on a U.S. exchange.

However, companies that conduct Regulation A and Regulation CF offerings are not bound by securityholder number limitations if the companies use an SEC registered transfer agent, like Colonial Stock Transfer, and follow these provisions:

Regulation Crowdfunding (Reg CF)

  • The company must be current in its Reg CF annual reporting requirement under Rule 202.
  • The company must not possess more than $25 million total assets at the end of its last fiscal year.
  • The company must use an SEC registered transfer agent.

Regulation A (Reg A) Tier II

  • The company must be current in its reporting requirement under Securities Act Rule 257(b), which includes Reg A annual, semiannual, and special financial reports.
  • The company’s public float must be less than $75 million at the end of its last semiannual period, or where there is no public float, the annual revenue must be less than $50 million at the end of its previous fiscal year
  • The company must use an SEC registered transfer agent.

For Reg CF companies with over $25mm in assets, in most cases, it makes sense to go public and take advantage of the publicly traded market benefits.  Likewise, Reg A companies with valuations over $75 million can take advantage of the vast number of benefits of being a public company.

In both Reg CF and Reg A Tier II, the company must seek services of a transfer agent registered with the Commission pursuant to Section 17A of the Exchange Act. Section 17A of the Exchange Act requires Transfer Agents to be registered with the SEC and comply with various reporting, recordkeeping, and other requirements to avoid license suspension.

Colonial Stock Transfer has been registered with the SEC since 1987 and offers innovative features in its online cap table management platform for companies and their investors.

Contact us toll-free at (877) 285-8605 or complete our Request Information Form for more information.

Exceptions to Exchange Act Registration for Reg A and Reg CF Companies
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