We specialize in assisting smaller public companies and their shareholders in complying with the federal securities laws. These laws are administered and enforced by the Securities and Exchange Commission (the “SEC”). The most significant are:
- The Securities Act of 1933. This statute relates to requirements for a company to offer and sell its securities to the public, and the liabilities of a company, its directors and others if they contravene the provisions of that law.
- The Securities and Exchange Act of 1934. Its most significant provisions for smaller public companies are the filing of annual, quarterly and other reports, and, in some cases, regulation of the manner in which votes are sought from shareholders and the reporting of sales of the company’s shares by its officers, directors and larger shareholders. This law also provides a means under which a company may become public that does not involve an offering of its securities.
The SEC has adopted many rules and regulations, some of which are complex, administering these laws, providing exemptions from some provisions of these laws and specifying in detail the manner in which they are to be complied with. For example, while the Securities Act requires simply that a registration statement must be filed if a company wishes to make a public offering, the SEC has adopted extensive regulations that relate to the content and preparation of registration statements.
A company and its shareholders may sell its securities by offering them to the public or by selling them privately. Common scenarios are:
- A company wishes to sell its securities to the public. It may do so under a registration statement or an offering statement that it files with the SEC and which, after review, and compliance with the SEC’s comments, it declares effective.
- A shareholder wishes to sell securities that were purchased directly from a company. In this case, the company may file a registration statement or an offering statement under which these shares may be sold. More often, a shareholder who does not hold a large portion of the company’s shares and is not an officer or director of the company will be able to sell his shares under an exemption from filing a registration statement called “Rule 144.” Officers, directors and large holders may also sell shares under Rule 144, but the number of shares that may be sold is restricted and the conditions are more stringent. If the securities have been held for more than 2 years, other exemptions may be available.
- A company wishes to sell its securities to private investors. If all of the investors are “accredited investors” (persons who have high levels of income or wealth), the company may sell securities without limitation under an exemption from registration afforded by a rule of the SEC. If some of the investors are not accredited investors, other exemptions are available, but the manner of offering, documentation required, the value of the securities sold and/or the number of purchasers may be limited.
After a company becomes public, it will be required to file periodic reports with the SEC. These reports are required to contain the company’s financial statements, and depending on the requirements for a particular report, will also contain information about the company, its business, its financial condition, its officers and directors and other matters. Some companies are required to provide information (proxy statements and information statements) to their shareholders in connection with stockholder meetings and consents.
Other aspects of being a public company are dealing with entities though which its securities may be traded, such as the New York Stock Exchange, NASDAQ and OTC Markets Group, with the Financial Industry Regulatory Authority, which provides trading symbols and furnishes information about dividends, name changes, stock splits and other matters to the financial community, and with state securities commissions, may have regulations that a company must comply with when it offers its securities.
Some of the securities projects that the firm has undertaken are registration statements under the Securities Act of 1933 (Forms S-1, S-3, S-4 and S-8); Regulation A offerings; private placements (Section 4(a)(1) of the Securities Act and Regulations D and Regulation S); reports under the Securities Exchange Act (Forms 10-Q, 10-K and 8-K); registration statements under the Securities Exchange Act (Form 10); and regulation 14 information statements and proxy statements.