Less than a week to go before the revisions to Regulation A go into effect and many companies are making plans to make an offering. It’s not too late to back out, though!
It may seem odd that I’m saying this as both I personally and CrowdCheck as a company are very much in favor of Regulation A. But companies need to know that they may be making a long-term commitment to ongoing SEC disclosure requirements, and be comfortable with that.
You’re probably aware of the Regulation A ongoing disclosure requirements, which requires annual and semi-annual filings. The required disclosure is not too different from initial filings.
But you have to bear in mind that at some point you might be subject to full SEC disclosure. Generally companies are required to become fully SEC-reporting (quarterly filings of much more extensive documents) when they acquire a certain number of shareholders of record and a certain amount of assets. The SEC has granted conditional relief from this requirement for companies making Tier 2 Reg A offerings. “Conditional.” And the conditions include (in addition to having a stock transfer agent registered with the SEC) not exceeding certain public float (value of securities publicly traded) or revenue amounts. The amount for revenue is currently (the SEC may change this in the future) $50 million. Which may seem like a lot, but I know a lot of companies in this space are looking for rapid growth.
If you’re making that much in revenues, you’ll probably be able to afford a fancy law firm to do your SEC filings for you, and you’ll have a couple of years transitional period before you become fully-reporting, but you may want to get legal advice now, to understand what those filings involve, and to make sure you aren’t taken by surprise by bumped-up SEC requirements in the future.