| Any security may be registered by qualification.
Securities should be registered by qualification when no other method is
available.
The requirements and method of registering can be found in section 61-1-10
of the Act and section R164-10-2 of the Utah
Administrative Code (UAC). Section 61-1-11 of
the Act and sections R164-11-1 and
R164-11-7b
of the UAC may also be applicable.
Filing: To register securities by qualification, the
issuer should file the following items with the Division:
- Form 10-2-1, manually executed by all
officers, directors, or partners;
- Form 10-2-1B for each officer, director,
promoter, 10% shareholder, broker-dealer or issuer agent, and attorney;
- Form U-2 - Uniform Consent to Service of
Process, with original signatures;
- Two copies of preliminary prospectus (contents as required by
R164-10-2(E)
or U-7);
- Two copies of financial statements (prepared in conformance with
R164-10-2(F));
- Opinion of counsel (as required by subsection 61-1-10(2)(n));
- Form U-2A if registration statement is filed
by or on behalf of a person other than an individual;
- Copy of the organizational documents (as required by
R164-10-2(I));
- Copy of subscription agreement to be used with offering;
- Specimen security (as required by
R164-10-2(J));
- Copy of selling documents (as required by
R164-10-2(K));
- Form 11-7b (as required by
R164-11-7b);
- Copy of any order, judgement or decree described in
R164-10-2(E)(2)(d)(ix);
- Copy of any materials to be used to advertise or solicit sales;
- Written consents (as required by
R164-10-2(L));
- Copy of all material contracts or agreements;
- Original documents supporting value of assets, ie, appraisals, assays,
reserve reports, etc.;
- Other documents as may be requested by the Division of Securities; and
- $300 filing fee
Merit Requirements:
The issuer must comply with the the following merit requirements:
- Minimum offering amount for development stage companies (as detailed in
R164-10-2(G)(1))
- Maximum Dilution of 33 1/3% for development stage companies and 50% for
all others (See R164-10-2(G)(2))
- Minimum promoter equity (as detailed in
R164-10-2(G)(3))
- Maximum offering expenses of $6,000 or 8% of minimum offering amount,
not including commissions (see
R164-10-2(G)(4))
Additional Requirements:
The issuer must comply with the following additional requirements:
- Development stage companies must comply with the provisions of
R164-11-1
- Fund impound requirements of R164-11-7b
- Sales commission requirements of R164-12-1f
Prospectus: The prospectus
requirement may be satisfied by using Form U-7, or
by including the following information:
(1) Facing pages
(a) Title of document;
(b) Number and class of shares or units offered;
(c) Par or stated value;
(d) Entity description, including:
(i) name,
(ii) address,
(iii) type,
(iv) state and date of
incorporation or organization;
(e) Statement as to whether or not a public market exists
or will exist;
(f) Statement as to how the securities are registered or
exempt at both the federal and state level;
(g) Statement that registration with the Division is
neither a recommendation or endorsement of any security, individual, firm or
corporation;
(h) Statement as to whom offering is made;
(i) In chart form, including:
(i) shares or units offered,
(ii) price per share,
(iii) commissions,
(iv) net proceeds to the issuer,
and
(v) minimums and maximums sought;
(j) Footnotes including:
(i) consideration sought,
(ii) manner of offering,
(iii) amount and type of sales
commissions to be paid, and
(iv) the maximum amount of offering
expenses;
(k) Broker-dealer or agent name, address, and telephone
number;
(l) Statement that no person is authorized to make any
statements not contained in the disclosure document and that practices to the
contrary may be a criminal offense;
(m) Effective date of the prospectus.
(2) Subsequent pages
(a) The issuer:
(i) history,
(ii) purpose,
(iii) intentions,
(iv) predecessors;
(b) Risk factors;
(c) Conflicts of interest;
(d) With respect to every director and officer of the
issuer, the following information:
(i) Name, age, residential address;
(ii) Occupation and business
experience during the past five years;
(iii) The number of shares or
partnership interests of the issuer owned as of a specified date within 30
days of the filing of the registration statement, the approximate date of
purchase and the consideration paid for those shares or interests;
(iv) The amount of the securities
covered by the registration statement to which an intention to subscribe has
been indicated;
(v) Any material interest in any
material transaction with the issuer or any significant subsidiary effected
within the past three years or proposed to be effected;
(vi) Any family relationship
between any director or officer;
(vii) Any other director or officer
or similar position held in any other non-public company;
(viii) Any previous involvement in
a public company as an officer, director or promoter, including a complete
description of the company and affiliation with the company, the dates of and
amounts raised in public offerings of the company and, if the company has
undergone a reorganization, merger or an acquisition of assets in which an
amount of stock representing more than 50% of the company's outstanding stock
was issued, the consideration per share received by the company and the book
value per share of the company immediately before and after the
reorganization, merger or acquisition of assets;
(ix) Involvement in any material
legal proceeding;
(x) Any remuneration paid directly
or indirectly by the issuer, its predecessors, parents, or subsidiaries,
during the past twelve months and estimated to be paid during the succeeding
twelve months;
(e) With respect to any person owning of record, or
beneficially, 10% of the outstanding shares of any class of equity security of
the issuer, the same information specified in subparagraphs (E)(2)(d)(i) and
(iii)-(x) of this rule.
(f) With respect to every promoter, if the issuer was
organized within the past three years, the same information as specified in
subparagraph (E)(2)(d) of this rule and any amount paid by the issuer within
the past three years as well as the consideration given for such payments.
(g) With respect to any person on whose behalf any part of
the offering is to be made in a nonissuer distribution the following
information:
(i) The information required in
subparagraph (E)(2)(d)(i) of this rule;
(ii) The amount of securities of
the issuer held as of the date the registration statement was filed with the
Division;
(iii) The information required in
subparagraph (E)(2)(d)(v) of this rule;
(iv) Statement of reasons for
making the offering.
(h) Dilution, share ownership and capital contributions:
narrative discussion and graphic or tabular illustration, such as bar graphs
or pie charts;
(i) Fund impound:
(i) amount,
(ii) duration,
(iii) location, and
(iv) statement that funds will be
released only upon order of the Division;
(j) Material litigation which affects the offering;
(k) Summary of the Opinion of Counsel required by
Subsection 61-1-10(2)(n);
(l) The substance of reports, findings, appraisals and
valuations provided by persons who are named as having prepared or certified
such reports or valuations pursuant to Subsection 61-1-10(2)(o);
(m) With respect to Limited Partnerships, net worth of each
individual general partner exclusive of home, automobile and home furnishings
or, in the alternative, a representation that the general partner meets the
net worth requirements of subparagraph (G)(3)(b)(iii) of this rule;
(n) Definition section, where material;
(o) Substance of material contracts and agreements;
(p) The amount of shares subject to transferability
restrictions, contractual or otherwise, and the nature of said restriction;
(q) Statement as to the issuer's fiscal year-end date;
(r) Financial statements as required by this rule;
(s) Statement of the intended use of proceeds of the
offering as required by Subsection 61-1-10(2)(i);
(t) Transfer agent's name and street address;
(u) Statement that any and all amendments to the prospectus
will be promptly filed with the Division, distributed to purchasers in the
offering, and made a part of any prospectus used thereafter;
(v) Statement that the Division, market makers, and
security holders will be promptly notified in writing of any change in the
management, purpose, and control of the issuer, or any material or adverse
condition affecting the issuer.
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After the registration statement and fee are received, the application is
assigned to a securities examiner for review. The examiner will determine
whether the issuer has met the requirements described above, and will pay
particular attention to the contents of the prospectus. If there are any
deficiencies or questions, the examiner will issue a comment letter which
provides very detailed questions and requested amendments which must be
satisfied prior to the registration statement being declared effective.
Failure to repond to the comment letter will result in denial of the
application.
If the issuer is filing under SCOR (using a Form U-7 for the prospectus) in
two or more of the following states, Alaska, Arizona, Colorado, Idaho,
Montana, Nevada, New Mexico, Oregon, Utah or Washington, the issuer may
request Regional Review. Regional review is a coordinated file review process
that allows a compnay to file an application for registration in numerous
states and receive consolidated comments through one lead state selected by
the states in which the applicant filed. Regional
Review is described in more detail below.
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After the application is reviewed and all comments have been satisfied, the
Division will declare the registration statement effective for a term of one
year. A certificate of registration will be issued at the time of
effectiveness. The registration will also cover secondary transactions until
the expiration date.
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Whenever there is a material change in any information that has been filed
with the Division, an amendment must be made within 10 days of the change.
There is no fee for amendments.
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After the registration statement becomes effective, the issuer has the
responsibility to comply with the following requirements:
- Provide Division with copy of final prospectus within 10 days after
effectiveness date
- Provide Division with closing report on Form 10-2-1A within 10 days
after expiration or sell out
- Provide Division with list of purchasers within 10 days after expiration
or sell out
- File periodic financial statements during and after effectiveness as
required by R164-10-2(H)
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Small Company Offering Registration, or SCOR is an alternative way of
registering securities by registration. The most prominent feature of SCOR is
the Form U-7 which consists of 50 questions. When
the Form U-7 is completed, the questions and answers act as the prospectus for
the offering. To register using SCOR, the Form U-7, required exhibits and fees
are filed in each state in which the securities are to be sold. SCOR may be
utilized in conjunction with Federal Rule 147, 504, and Regulation A.
In general, SCOR has been praised as being "user-friendly" and
some corporate executives have been able to file SCOR offerings without much
professional assistance. However, this is probably not wise because the SCOR
form contains a number of sophisticated questions that may be beyond the
ability of the company's officers. Innocent mistakes or incomplete answers can
subject the company to devastating liability. The Division can provide a copy
of the SCOR form and a manual which provides reference for completing the
form.
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Regional Review
In addition, many states permit the filing of SCOR offerings in multiple
states while subjecting the company to a single review in a process called
regional review. For example, nine western states, including Alaska, Arizona,
California, Colorado, Idaho, Nevada, Oregon, Utah, and Washington, formed the
Western Regional Review Project. When you file in 2 or more of these states
and request regional review, the states will assign a lead state to coordinate
comments and the company will only need to resolve comments with the lead
state. Once the lead state clears the offering, it will become effective in
all states of the region in which it was filed. Also, many states will waive
substantive requirements if the company files through regional review. Regions
were also formed in New England and the Midwest. Regional
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