Registration by Qualification

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.

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Initial Application

Filing:  To register securities by qualification, the issuer should file the following items with the Division:

  1. Corporate Finance Filing Portal
    a. Form 10-2-1, manually executed by all officers, directors, or partners;
    b. Form 10-2-1B for each officer, director, promoter, 10% shareholder, broker-dealer or issuer agent, and attorney;
    c. Form U2 - Uniform Consent to Service of Process, with original signatures;
    d. A copy of the preliminary prospectus (contents as required by R164-10-2(E) or U7;
    e. A copy of the financial statements (prepared in conformance with R164-10-2(F);
    f. Opinion of counsel (as required by subsection 61-1-10(2)(n);
    g. Form U2a if registration statement is filed by or on behalf of a person other than an individual;
    h. Copy of the organizational documents (as required by R164-10-2(I);
    i. Copy of subscription agreement to be used with offering;
    j. Specimen security (as required by R164-10-2(J));
    k. Copy of selling documents (as required by R164-10-2(K));
    l. Form 11-7b (as required by R164-11-7b);
    m. Copy of any order, judgement or decree described in R164-10-2(E)(2)(d)(ix);
    n. Copy of any materials to be used to advertise or solicit sales;
    o. Written consents (as required by R164-10-2(L));
    p. Copy of all material contracts or agreements;
    q. Original documents supporting value of assets, ie, appraisals, assays, reserve reports, etc.;
    r. Other documents as may be requested by the Division of Securities; and
  2. ACH payment made directly to the Division
    a. Provide the ACH/Wire payment information within the filing portal
    b. $300 filing fee

Merit Requirements:  The issuer must comply with the following merit requirements:

  1. Minimum offering amount for development stage companies (as detailed in R164-10-2(G)(1))
  2. Maximum Dilution of 33 1/3% for development stage companies and 50% for all others (See R164-10-2(G)(2))
  3. Minimum promoter equity (as detailed in R164-10-2(G)(3))
  4. 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:

  1. Development stage companies must comply with the provisions of R164-11-1
  2. Fund impound requirements of R164-11-7b
  3. Sales commission requirements of R164-12-1f

Prospectus:  The prospectus requirement may be satisfied by using Form U7, or by including the following information:

  1. Facing pages
    1. Title of document;
    2. Number and class of shares or units offered;
    3. Par or stated value;
    4. Entity description, including:
      1. name,
      2. address,
      3. type,
      4. state and date of incorporation or organization;
    5. Statement as to whether or not a public market exists or will exist;
    6. Statement as to how the securities are registered or exempt at both the federal and state level;
    7. Statement that registration with the Division is neither a recommendation or endorsement of any security, individual, firm or corporation;
    8. Statement as to whom offering is made;
    9. In chart form, including:
      1. shares or units offered,
      2. price per share,
      3. commissions,
      4. net proceeds to the issuer, and
      5. minimums and maximums sought;
    10. Footnotes including:
      1. consideration sought,
      2. manner of offering,
      3. amount and type of sales commissions to be paid, and
      4. the maximum amount of offering expenses;
    11. Broker-dealer or agent name, address, and telephone number;
    12. 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;
    13. Effective date of the prospectus.
  2. Subsequent pages
    1. The issuer:
      1. history,
      2. purpose,
      3. intentions,
      4. predecessors;
    2. Risk factors;
    3. Conflicts of interest;
    4. With respect to every director and officer of the issuer, the following information:
      1. Name, age, residential address;
      2. Occupation and business experience during the past five years;
      3. 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;
      4. The amount of the securities covered by the registration statement to which an intention to subscribe has been indicated;
      5. 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;
      6. Any family relationship between any director or officer;
      7. Any other director or officer or similar position held in any other non-public company;
      8. 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;
      9. Involvement in any material legal proceeding;
      10. 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;
    5. 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.
    6. 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.
    7. With respect to any person on whose behalf any part of the offering is to be made in a nonissuer distribution the following information:
      1. The information required in subparagraph (E)(2)(d)(i) of this rule;
      2. The amount of securities of the issuer held as of the date the registration statement was filed with the Division;
      3. The information required in subparagraph (E)(2)(d)(v) of this rule;
      4. Statement of reasons for making the offering.
    8. Dilution, share ownership and capital contributions: narrative discussion and graphic or tabular illustration, such as bar graphs or pie charts;
    9. Fund impound:
      1. amount,
      2. duration,
      3. location, and
      4. statement that funds will be released only upon order of the Division;
    10. Material litigation which affects the offering;
    11. Summary of the Opinion of Counsel required by Subsection 61-1-10(2)(n);
    12. 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);
    13. 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;
    14. Definition section, where material;
    15. Substance of material contracts and agreements;
    16. The amount of shares subject to transferability restrictions, contractual or otherwise, and the nature of said restriction;
    17. Statement as to the issuer's fiscal year-end date;
    18. Financial statements as required by this rule;
    19. Statement of the intended use of proceeds of the offering as required by Subsection 61-1-10(2)(i);
    20. Transfer agent's name and street address;
    21. 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;
    22. 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.

Review Process

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 respond to the comment letter will result in denial of the application.

If the issuer is filing under SCOR (using a Form U7 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 company 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.

Effectiveness and Expiration

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. The registration will also cover secondary transactions until the expiration date.


Post-Effective Requirements

After the registration statement becomes effective, the issuer has the responsibility to comply with the following requirements:

  1. Corporate Finance Filing Portal
    1. Provide Division with copy of final prospectus within 10 days after effectiveness date
    2. Provide Division with closing report on Form 10-2-1A within 10 days after expiration or sell out
    3. Provide Division with list of purchasers within 10 days after expiration or sell out
    4. File periodic financial statements during and after effectiveness as required by R164-10-2(H)


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. Amendments should be submitted through the filing portal.

Small Company Offering Registration, or SCOR is an alternative way of registering securities by registration. The most prominent feature of SCOR is the Form U7 which consists of 50 questions. When the Form U7 is completed, the questions and answers act as the prospectus for the offering. To register using SCOR, the Form U7, 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.

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