Registration statement: Types, key components and steps
A registration statement is one of the most important documents when you make the decision for your business to go public. Without completing one of the various forms, you simply won’t be allowed to raise capital through investors — so they’re a necessary part of the process. They can be complicated, in-depth and meticulous. But, they offer transparency and legal compliance, providing investors with insight into the objectives, risks and financial health of your business. In this article, we’ll explore:
- The different types of registration statements
- The key components of a registration statement
- The SEC process
- How to craft a gold-standard statement for your business
What is a registration statement?
A registration statement under the Securities Act of 1933 is a document filed with the Securities and Exchange Commission (SEC) used to outline information related to a public securities offering. This includes financial information, company objectives, and risks. It ensures complete transparency and compliance with securities laws.
Once you receive approval for your filed report, you can sell securities to raise capital.
A common question is, what does it mean when a registration statement becomes effective? This is simply the status once the SEC has reviewed the registration statement and any amendments have been made. At this point, the business can start to offer securities to the public.
Types of registration statements
There are several types of registration statements, with each serving a different purpose.
S-1 registration statement
An S-1 registration statement is filed when a business conducts its initial public offerings (IPOs). It’s a comprehensive document that includes information related to:
- Operations
- Objectives
- Finances
- Management
- Risks
- Use of proceeds
Filing an S-1 ensures potential investors have all the relevant information they need to make an informed decision. It also ensures complete compliance with securities laws. The SEC reviews the S-1 before approving the public offering.
S-3 registration statement
A Form S-3 is completed by businesses that have previously filed statements with the SEC for public offerings. It isn’t as comprehensive as Form S-1 but still requires a high level of detail. Only companies that meet certain criteria are eligible to file an S-3:
- It must have a public float of at least $75 million
- It must have filed all necessary reports under the Securities Exchange Act of 1933 (such as Form 10-K and Form 10-Q) at least a year before filing S-3
- It must not be a shell company
- It must be fully compliant with state and federal regulations
S-3 provides flexibility by facilitating raising capital through shelf registrations.
S-4 registration statement
An S-4 registration statement is filed in the event of a merger, acquisition or exchange offer. It ensures companies can register securities that will be used as part of a deal. An S-4 requires highly detailed information about the transaction and companies involved, as well as what securities are offered. It offers shareholders and investors full transparency for informed decision-making.
S-8 registration statement
An S-8 registration statement is filed with the SEC when a business chooses to offer employees stock options as part of a benefits package. It isn’t as comprehensive as other forms as it works under the assumption that it’s relevant to those who already know about the company, such as its financial health, objectives and risks.
Resale registration statement
A resale registration statement is filed with the SEC to allow shareholders to resell their securities that were previously acquired privately. Depending on the criteria, this is usually Forms S-1 or S-3.
Foreign registration statement
A foreign registration statement is filed with the SEC by an international company looking to offer securities to investors based in the United States. It ensures businesses comply with US securities laws and regulations. There are several types of foreign registration statements, which follow the same pattern as other registration statements:
- F-1 registration statement: Filed by businesses for their IPOs
- F-2 registration statement: Filed by businesses that meet specific criteria, including having a history of compliance with US reporting laws
- F-4 registration statement: Filed by businesses in the event of mergers, acquisitions and exchanges
Key components of a registration statement
There are several key components of a registration statement. Some components feature on all form types, while some are only found on specific forms.
Here are some of the key components you might expect to see on registration statements:
- Prospectus: A vital component of all registration statements that provides essential information about the offering and the terms of the securities offered.
- Exhibits and legal documents: This includes contracts and other documents. Included in all forms with the exception of S-8.
- Financial statements: Documents that detail the company’s financial health and history. Included in all forms except S-8.
- Risks: Outlines any risks to the future of the business, both financially and operationally. Isn’t featured in the S-8 as it’s specific to public offerings.
- Management’s Discussion and Analysis (MD&A): Features on all forms except S-8 and provides insight from management on the company’s finances and operations.
- Information about Directors and Executive Officers: Provides background information on directors and executive officers. Features on all forms except the S-8.
- Legal proceedings: Details any legal disputes. Can appear on any SEC registration statement form if relevant.
The SEC registration statement process
While every organization will approach filing a registration statement with the SEC slightly differently, most of the steps will follow the same basic process.
1. Preparation of the registration statement
The general counsel will draft the registration statement to include the prospectus, financial statements, management’s discussion and analysis, legal documents and risk factors. The corporate secretary will then organize internal reviews and approvals with the relevant stakeholders.
This can be fairly lengthy and labor-intensive. Make sure you allocate plenty of time to ensure you don’t overlook any details and that the first draft is as comprehensive as it needs to be.
2. Filing with the SEC
The legal and finance team verifies all relevant documents. After checking all the documents, the registration statement can be filed via the SEC’s Electronic Data Gathering, Analysis, and Retrieval system, otherwise known as EDGAR.
3. SEC review and approval
The SEC reviews the registration statement to ensure it meets compliance requirements. The review process can vary but will usually take around 30 days – but it can be longer. At this time, the SEC may request more information, and it’s important to respond and clarify points quickly and accurately. You can save time by anticipating potential comments and preparing responses ahead of time.
4. Post-effective amendments and updates
Once the SEC has approved the registration statement, you can make amendments and updates. These must also be filed accordingly and comply with regulations.
5. Marketing and the roadshow
You can now begin attracting investors. This means getting your name out there to participate in roadshows, investor meetings and presentations.
6. Sale of securities
Facilitate the sale of securities to investors through underwriters and your legal and finance teams. It’s important to be transparent throughout the process to build investor trust.
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FAQs
What does it mean when a registration statement becomes effective?
A registration statement becomes effective once it has been approved by the Securities and Exchange Commission (SEC). Approval is granted when you provide all the relevant criteria and information and meet the compliant regulations. This allows the company to sell securities in an effort to raise capital through a public offering.
How long are registration statements good for?
So, how long are registration statements good for? How long registration statements are good for depends on the type of statement filed with the SEC. Form S-1 doesn’t have an expiration date, but it may need to be refiled if there are changes to the business.
However, Form S-3 is valid for a period of three years after it’s approved.
What are the consequences of late filing of the registration statement?
The potential consequences of filing a registration statement late include reduced investor confidence, regulatory penalties and delays in raising capital through investors. The SEC may also impose fines or sanctions, which can have a knock-on impact on stock prices.
Who needs to review and sign off on the registration statement?
Several internal stakeholders should review the registration statement before it’s filed with the SEC, including:
- Board of Directors: Review and authorize the filing
- Legal Counsel: Verify legal documents
- Financial Officers: Verify financial statements and documents
- Executive Management: Provides input
External auditors can also offer input and ensure documents are accurate and fairly presented.
What is the registration statement of the 33 Act?
A registration statement is what must be completed by a business seeking to offer securities to the public. The statement must be filed with the Securities and Exchange Commission (SEC).
This is stated in the 1933 Act (also known as the Securities Act) to prevent unlawful practices and behaviors during the sale of securities.
How often should we update our registration statement pre-IPO?
Before an IPO, you should update your registration statement regularly to ensure it’s a true reflection of the current status of your business, including finances and operations. This is so it’s completely accurate and transparent and provides all the up-to-date information investors need to make an informed decision. Regularly updating your registration statement also prevents the need for last-minute changes, which can lead to time constraints and missing details.
For in-depth information on overcoming the complexities of filing a registration statement from leading industry experts, download The road to IPO starts now: 7 steps for going public the right way.
