Regulation A constitutes an SEC registration exemption for companies publicly offering securities totaling less than $50 million within a year. While an offering to sell securities must register with the US SEC per the 1933 Securities Act, companies using Regulation A have advantages over terms required in full registration.
Advantages of Regulation A
In general, Reg A offers compensations for the demanding requirements set in standard documentation. Advantages provided by Regulation A include:
- Three potential offering-circular arrangement formats
- More simplified and efficient financial statements not subject to audit obligations
- No Exchange Act reports required below a $10 million asset threshold and 500 shareholders
Regulation A+ Tier Updates
As of December 2018, the SEC made two tiers available for public offerings per Regulation A+. Tier 1 is relevant for public offerings as high as $20 million within a year. Tier 2 is relevant for offerings as high as $50 million within a year.
The purpose of Reg A+ is to make capital raising easier for smaller businesses. Before the new rules, companies needing to meet reporting requirements per the SEC Securities Exchange Act did not have exemption eligibility. After the amendment, these reporting requirements now apply as Reg A+ reporting requirements.
Benefits of Reg A+
Under Reg A+, small and mid-sized businesses have fewer reporting requirements or restrictions. Procedures for SEC review and offering circulars are simpler and bypass the disadvantages of dilutive financing or convertible debt.
Reg A+ rules also provide the flexibility to test the investor field through additional options, including offers to individual buyers and investors.
Reg A+ rules also forestall state registration and compliance with Blue Sky laws in every state, although some further reporting requirements apply in a small number of states. Nevertheless, the preempted requirements represent a significant reduction in costs and legal paperwork.
Safe harbor for integration of offerings, including offerings previously registered per the Securities Act, also allow the alternation of registered and Reg A offerings and permit potential funding through both individual and institutional investors. And the smaller shareholder number required by Regulation A makes suspending and deregistering SEC reporting easier.
Funding software by Equity Track opens up capital raising options for both SEC-reporting and non-reporting companies through Reg A+ offerings. Contact the investing solutions provider at (801)-433-9925 or online via https://www.equitytrack.co/ to learn more.
