Small Corporate Offering Registration: Everything to Know
Small corporate offering registration, which is also referred to as SCOR, is a way small companies can easily raise capital funds by selling shares.3 min read
2. Registering for SCOR
3. Selling Shares Under a SCOR Offering
4. Form D
5. Requirements to Qualify for a SCOR
6. Companies That Can't Use the SCOR Program
Small corporate offering registration, which is also referred to as SCOR, is a way small companies can easily raise capital funds by selling shares. SCOR gives small business owners a way to be exempt from traditional requirements for registering under federal securities regulations that are in effect for businesses offering and selling up to a maximum of one million dollars of shares in a 12-month time period. In addition to raising capital, SCOR can be used as a portion of a succession plan and for liquidity reasons.
Rule 504 of Regulation D
A Small Corporate Offering Registration is also called:
- Rule 504 of Regulation D
- Reg D of Rule 504.
- Over-the-counter securities sale
Rule 504 of Regulation D is the Securities and Exchange Commission, or SEC, name for a SCOR. The over-the-counter reference refers to the fact that these securities aren't traditionally traded on an exchange. They can be traded online or over the phone between dealers and brokers. Because most bank loans are offered to bigger companies, SCOR was started to provide smaller business entities access to capital funding.
Registering for SCOR
The registration document for SCOR has a basic question and answer format that's designed to be filled out without hiring a securities lawyer or a certified public accountant, also called a CPA. The form is then filed online. There is no requirement for a business to register with the SEC when filing SCOR documentation.
Selling Shares Under a SCOR Offering
Under a SCOR offering, there are several ways a company can sell its shares.
- Selling agents: Selling agents receive payment for selling shares on a commission basis.
- Internet: Advertising online is another option companies have when selling shares.
- Traditional advertising formats: Companies can use any traditional ad format to sell shares.
- No limits are imposed on the number of buyers or types of buyers who can purchase shares.
- A single buyer can purchase the entire SCOR offering as part of a plan to take over ownership of the business.
SCOR registration is open to both United States as well as Canadian corporations.
When a company is already in compliance with regulation 504, filing with the SEC to make a SCOR offering isn't necessary, but filing Form D is required. Form D is filed electronically, and it contains several key pieces of information about the company.
- Name and address of each of the executives in the company
- Name and address of the company's promoters and directors
- Pertinent facts about the SCOR offering
The EDGAR database at the SEC contains all SCOR filings, and the filings have to be completed within 15 days of the first securities that sell in the offering.
Requirements to Qualify for a SCOR
To qualify for a SCOR registration, companies have to provide
- Financial statements: The company must file financial statements from the last fiscal year when filing for SCOR. These documents need to be prepared following generally accepted accounting principles, or GAAP.
- Details of the offering: The registration needs to include the types of stock offered, such as preferred stock, common stock, convertible preferred stock, stock options, warrants, rights, and also membership interests if the business is an LLC.
- Share price: Prices of shares can range from a low end of one dollar per share, and up to one million shares can be issued by the small business in each 12 month period.
Companies That Can't Use the SCOR Program
There are a number of company types that can't use the SCOR program, they include:
- Petroleum exploration companies
- Petroleum production companies
- Mining and extraction companies
- Holding companies
- Portfolio companies
- Commodity pools
- Equipment leasing programs
- Real estate programs
- Blind pools
- Companies that fall under the regulatory authority of an agency other than the SEC
- Publicly held companies
Some states also impose their own SCOR filing requirements, such as New Jersey, where filers must fill out several forms and pay fees in order to file for a SCOR.
SCOR registration is an extremely detailed set of filings that companies sue to share all the information that investors need to decide whether to invest in a company's offering or not.
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