Key Takeaways:

  • Form D allows companies to raise capital through private securities offerings without undergoing a full IPO process.
  • It is required for businesses using Regulation D or Section 4(6) exemptions to offer securities legally.
  • Accredited investors—those with high net worth or substantial annual income—are the primary participants in these offerings.
  • Filing Form D helps businesses stay within SEC regulations and avoid penalties for unregistered securities sales.
  • Filing must be completed within 15 business days of the first securities sale.
  • Companies must update Form D filings if any significant changes occur.
  • Certain states may require additional filings beyond federal Form D submission.
  • Failure to file can result in fines, investor refunds, and potential legal consequences.

What is Form D?

Form D is a filing with the Securities and Exchange Commission (SEC) that allows companies under a Regulation D exemption or Section 4(6) exemption to offer stock to finance their businesses without going through the IPO process and selling stock to the public.

Companies that sell securities typically have to register with the Securities and Exchange Commission (SEC) under the Securities Act of 1933. This is a long process and can make it complicated to follow and understand the law. Smaller companies seeking venture capital can instead file Form D - a process that is quicker, simpler and protects the company from potential legal problems.

Key Features of Form D Filing

Form D serves as a notice filing rather than a formal registration of securities. Key aspects include:

  • Electronic Filing Only: The SEC requires companies to file Form D via the EDGAR (Electronic Data Gathering, Analysis, and Retrieval) system.
  • Minimal Information Requirement: Unlike a traditional securities registration, companies only need to disclose basic details, including the size of the offering, type of securities, and details of the company’s executives and promoters.
  • No Approval Process: The SEC does not approve or deny Form D filings—it simply acknowledges receipt.
  • Federal and State Considerations: While Form D is a federal filing, companies may need to register in individual states where they are offering securities. Each state has its own securities law, often called Blue Sky Laws, which may require additional notifications or fees.

Why Is Form D Important?

Form D is important because it keeps you within legal boundaries. You can't simply begin selling securities to fund your business without filing the appropriate paperwork. If your offerings aren't public, you can avoid the typical registration process. Regardless of your final decision, you must let the SEC know you're offering securities.

Keep in mind that you must raise funding from “accredited investors” for the Form D exemption to apply, as noted in Rule 506 of Regulation D. These are investors who usually earn over $200,000 a year or are worth at least $1 million. You can also offer securities to companies worth at least $5 million. By either registering with the SEC or filing Form D, a business has taken the time to show they're not providing an illegal public offering.

Who Can Invest in Form D Offerings?

Securities sold under Form D exemptions are generally restricted to accredited investors and select institutional buyers. Accredited Investors Must Meet One of the Following Criteria:

  • Individuals with an annual income exceeding $200,000 ($300,000 if married) in each of the last two years, with expectations of the same income in the current year.
  • Individuals with a net worth of at least $1 million, excluding their primary residence.
  • Entities with at least $5 million in assets or companies in which all owners are accredited investors.

Although most Form D offerings target accredited investors, Rule 506(b) of Regulation D allows up to 35 non-accredited investors, provided they receive sufficient disclosure documents.

Reasons to Consider Not Using Form D

There are many exemptions from registering with the SEC, but companies usually stick with Form D because it provides the most benefits. That's why there are very few reasons to consider not using Form D. These include the following:

  • You've decided to make a public offering of securities for funding.
  • You want to keep the names of your investors from becoming public knowledge.

Filing Form D makes it easy for the public to find all of your company's information. However, there are some businesses that wish to maintain anonymity for their investors. For this reason, business owners should take a moment to consider whether making their information public might actually hurt the company.

Limitations and Risks of Form D Offerings

While Form D provides a streamlined way to raise capital, there are potential risks:

  • Limited Liquidity: Securities issued under Form D are restricted and cannot be freely traded for at least one year without an exemption.
  • No Public Solicitation in Some Cases: Under Rule 506(b), companies cannot use general advertising to attract investors. However, Rule 506(c) allows general solicitation but requires all investors to be accredited.
  • State Law Compliance: Some states impose additional fees or paperwork for companies using Form D exemptions.

Reasons to Consider Using Form D

There are several benefits to filing Form D, which is why it's the most popular exemption to the rule requiring Securities Act of 1933 registration. The following are some of the biggest reasons to consider using Form D:

  • It is a simple process that only involves notifying the SEC of stock promoters, executive officers, and other general information.
  • It covers you throughout America, so there's little time wasted learning state laws.
  • It avoids liabilities that could tarnish a company's reputation.
  • There are no fees for filing a Form D.

Deadline for Filing Form D

You must file Form D within 15 days of beginning to sell securities. Qualifying for an exemption under Regulation D isn't enough if you don't file on time. Your first “sale” only occurs when an investor is completely under contract to provide funding.

This timeline refers to 15 business days. If your filing deadline expires on a holiday, Saturday, or Sunday, you must submit it by the following business day.

Amending or Updating Form D

Businesses must update their Form D filings if any significant details change. This includes:

  • Material Changes in Offering Amount – If the company increases or decreases the total amount of securities offered.
  • Change in Key Executives – If there is a new executive officer or change in ownership structure.
  • Correction of Errors – If any information was incorrect at the time of the initial filing.
    Companies must submit amendments promptly through the EDGAR system to maintain compliance.

What Happens When Filing Form D vs. Not Filing?

If you qualify to use Form D when selling securities, your choice of whether to do so or not can lead to huge differences. Here are just a few examples:

  • A company wants to keep its investors confidential, so it registers with the SEC instead of filing Form D. By doing so, they must now learn the registration laws of every state they do business in and file the appropriate paperwork. Some states require a similar form, but anyone filing Form D will have a much easier time with state law.
  • A company decides to seek an exemption other than under Regulation D. They will again have to figure out state law, and the filing process will be much more complicated than simply filing Form D.

Steps to File Form D

If filing Form D, you must do so online. Here are the steps you'll need to take.

  1. Get CIK number and access codes. This must be done by giving information to the SEC's Filer Management page. You must also have a Form ID notarized and submitted.
  2. Log into the SEC's electronic gathering, analysis and retrieval (EDGAR) system page. You'll only have an hour after logging in to finish Form D, so fill out a paper version first for reference.
  3. By clicking “Submit,” your Form D will be filed.
  4. Check to see if your state requires you to submit a Form D for their records. This information can be found on the North American Securities Administrators Association webpage.

State-Specific Form D Filing Requirements

In addition to federal SEC filings, many states require companies to file Form D with state securities regulators. These filings are typically referred to as Blue Sky Filings.

  • Some states require additional filing fees or a copy of the federal Form D submission.
  • Companies should verify the specific requirements of each state in which they intend to sell securities.
  • The North American Securities Administrators Association (NASAA) website provides information on state securities laws.

Failure to meet state-level requirements could result in penalties or prevent a company from raising capital in certain states.

Frequently Asked Questions

  1. Do all private companies need to file Form D?
    No, only companies raising capital through Regulation D exemptions must file Form D. However, failing to file could lead to penalties.
  2. Can non-accredited investors participate in a Form D offering?
    Generally, only accredited investors are allowed. However, Rule 506(b) allows up to 35 non-accredited investors if additional disclosures are provided.
  3. Does filing Form D mean the SEC approves my offering?
    No, Form D is a notice filing, not an approval. The SEC does not review or approve securities under this exemption.
  4. What happens if I fail to file Form D?
    Failure to file can result in legal penalties, fines, and investor rescission rights, meaning investors could demand their money back.
  5. Are there penalties for filing Form D late?
    While there are no specific SEC-imposed late fees, delayed filings could result in enforcement actions or complications with state securities regulators.

Talk to a Lawyer

Although simpler than other registration processes, filing Form D can still seem complicated. If you need help filing the appropriate paperwork or making sure you're following the law, post your legal need in UpCounsel's marketplace. UpCounsel lawyers have an average of 14 years experience and only attorneys from top law schools like Yale and Harvard are accepted.