In today’s financial atmosphere, where commercial loans are a dwindling possibility, except for the most credit worthy and experienced borrower. Borrowers are hearing more and more about Public Companies, what they are and how they work.
Listing your company with the Securities and Exchange Commission (SEC) can help even startup companies. There is no minimum just as there is no maximum amount that is required or sough in order to ask for the Publics financial investment.
A Form 10 registration statement is used to register a “class of securities”. A Company that has more than $10,000,000 in total assets and 750 or more record shareholders is required to file a Form 10 registration statement. A Start up with minimal or no real assets is not but may at their discretion.
The advantage of a form 10 filing, is that the company becomes eligible to use SEC rule 144 to sell restricted securities, even as they have not filed an S1
A Form 10, is a general form for the registration of securities. And a form S1 is the initial registration form for new securities required by the SEC for all public companies. You may bypass a form 10 filing, depending on the status of your company, accordingly, should your total assets be less than $10,000,000 and your shareholders of record be less then 750 a form 10 may not be required. You can become a public trading company by filing a Form S1only.
Note Shell Companies have generally filed only a Form 10.
In addition, any company, whether publicly held or not and with or without assets, may voluntarily file a Form 10 registration statement at any time. A Form 10 registration statement automatically becomes effective sixty (60) days following filing.
The difference, An S-1 filing is required before shares can be listed on a national exchange. Form S-1 requires companies to provide information on the planned use of the sought capital requirements, to detail the current business model and competition, and provide a brief prospectus of the planned security itself, offering price methodology and any dilution that will occur to other listed securities.
A Form 10 registration statement does not make a company public. A public company, by definition, has public shareholders. A Form 10 registration statement can be filed by an entity with a single shareholder. Moreover, regardless of the filing of a Form 10, a Company must satisfy other regulatory obligations to trade its securities, it would require public shareholders, holding freely tradeable shares.
Restricted securities could be sold under Rule 144, a Form 10 registration statement has become an important avenue for many previously non-reporting entities. Technically Rule 144 provides a safe harbor from the definition of the term “underwriter” such that a selling shareholder may utilize the exemption contained in Section 4(1) of the Securities Act of 1933, as amended, to sell their restricted securities.
Shell Companies and Rule 144
In order to use Rule 144, a Company must have ceased to be a shell company, be subject to the reporting requirements of section 13 or 15(d) of the Exchange Act; (Which is what Form 10 accomplishes) have filed all reports and other materials required to be filed by section 13 or 15(d) of the Exchange Act, as applicable, other than Form 8-K reports; and have filed current “Form 10 information” with the Commission reflecting its status as an entity that is no longer a shell company, then those securities may be sold subject to the requirements of Rule 144 after one year has elapsed from the date that the issuer filed “Form 10 information” with the SEC.
In addition to filing annual reports on Form 10-K and quarterly reports on Form 10-Q, public companies must report certain material corporate events on a more current basis. Form 8-K is the “current report” companies must file with the SEC to announce major events that shareholders should know about.
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