Shelf Registration: A Comprehensive Overview | SEC Rule 415

Shelf registration pertains to SEC Rule 415 laid down by the US Securities and Exchange Commission (SEC). The SEC regulates the offerings of new stocks and administers the existing offerings through various rules and regulations. One of them is shelf registration, which requires a corporation to register with the SEC two years prior to the new offering.

What Is Shelf Registration?

Shelf registration was introduced by the US SEC in the year 1982 to let corporations make an arrangement of public offerings beforehand (two years) so that offerings can start whenever it is required during that period. This document can be used by a corporation on meeting certain eligibility criteria and can be used for issuing multiple securities.

Filing Shelf Registration

Shelf registration is done by filing a form with the SEC to declare that you or your company is going to offer new stocks. Such a registration gives an opportunity to the traders and small investors to review the status of your company and decide about investing in your stocks. Form S-3 or F-3 has to be filed if your company has complied with all other SEC filing requirements during the past year. F-1 or SB-2 has to be used when your company is not in compliance. You will have to submit the relevant form along with your company’s financial statement. You should have filled in your IRS employer identification number and the agent for service details accurately.

Automatic Shelf Registration

A relaxed registration process is available for the well-known seasoned issuers (WKSI) for the offerings like common stocks, securities, warrants or preferred stocks. It is known as automatic shelf registration, which came into being in 2005. However, to qualify as a WKSI, your company should have filed quarterly and annual reports in time and should have at least $700 million market capitalization. Alternatively, your company should have issued at least $1 billion of registered debt offerings during the last three years.

Details of Shelf Registration

It should contain the details of your company and its current financial status. This registration form must also give out details of the offering of the stocks. This means that it should describe the number of shares, type of shares and the value of each share on the offer.

Use of Shelf Registration

Shelf registration can be used by your company when you are going to issue the securities in multiple offerings over a period of two years. It is possible because, with shelf registration, multiple offerings can be made within a two-year period. Since the procedure of registering with the SEC for a new offering takes time, many companies make use of this kind of registration when the market conditions are not favorable or when the economy is declining. The reason for registering during such a time is that they get the registration process completed and start the offerings process as soon as the conditions revive.

Final Word

Shelf registration is a process that makes the procedure of issuing and selling new stocks simpler and easier for US-based corporations.