The SEC's Division of Corporation Finance has released frequently asked questions about confidential submissions by emerging growth companies of draft registration statements, as now permitted by the JOBS Act.
On April 10, 2012, the SEC's Division of Corporation Finance issued frequently asked questions clarifying certain details about confidential submission of draft registration statements for confidential non-public review by emerging growth companies (EGCs) under new Securities Act Section 6. Among other things, the questions clarify:
The types of registration statements that may be confidentially submitted to the SEC.
The mechanics for submitting a draft registration statement by an EGC, including timing for payment of the filing fee.
The information to be included in the draft registration statement.
The scope of test-the-water communications under new Securities Act Section 5(d).
The timing and manner for publicly filing the registration statement and confidential submissions on EDGAR.
The process for an EGC in registration switching to the confidential submission process for future amendments.
On April 10, 2012, the SEC's Division of Corporation Finance issued frequently asked questions (FAQs) clarifying certain details about confidential submission of draft registration statements for confidential non-public review by emerging growth companies (www.practicallaw.com/3-518-8137) (EGCs) under new Securities Act Section 6. Among other things, the questions clarify that:
An EGC may confidentially submit a registration statement if its IPO date has not occurred. IPO date is defined in Section 101(c) of the JOBS Act (www.practicallaw.com/2-518-7869) as the "date of the first sale of common equity securities of an issuer pursuant to an effective registration statement under the Securities Act of 1933." The term "date of the first sale" in the IPO date definition is not limited to the date of a company's initial primary offering of common equity securities for cash. It could also include an offering of common equity under an employee benefit plan registered on a Form S-8 and a selling shareholder's secondary offering registered on a resale registration statement.
A foreign private issuer that is an EGC can use the confidential submission procedure to the same extent as a domestic company (see also, Legal Update, SEC Division of Corporation Finance Issues Guidance on Confidential Registration Statement Submission under JOBS Act (www.practicallaw.com/0-518-8619)).
The filing fee for a Securities Act registration statement of an EGC is due when the registration statement is first filed publicly on EDGAR.
The confidential submission of a Securities Act registration statement does not constitute a filing for purposes of the prohibition in Section 5(c) of the Securities Act against making offers of a security in advance of filing a registration statement.
New Securities Act Section 6(e) does not specify what needs to be included in a draft registration statement. However, the draft registration statement is not required to be signed or include the consent of auditors and other experts as it does not constitute a filing for purposes of Sections 5(c) and 6(a). As is the case with other publicly filed registration statements, EGCs may also omit certain limited information from their initial submissions in reliance on existing rules and regulations relating to the content of filed registration statements. The draft should be substantially complete at the time of initial submission, including a signed audit report of the registered public accounting firm covering the fiscal years presented in the registration statement and exhibits (this is the same as is expected for non-public submissions by foreign private issuers). The SEC Staff will defer review of any draft registration statement submitted under Section 6(e) that is materially deficient.
New Securities Act Section 5(d) permits test-the-water communications to take place before filing a registration statement and Section 6(e) requires that the confidential submissions and all amendments must be publicly filed at least 21 days before the issuer conducts a road show. The SEC Staff will not object if an EGC does not treat test-the-water communications conducted in reliance on new Section 5(d) as a road show for purposes of Section 6(e). Section 5(d) communications are limited to communications with qualified institutional buyers and institutional accredited investors.
If an EGC does not conduct a traditional road show or otherwise engage in activities that would come within the definition of road show, the registration statement and confidential submissions must be publicly filed on EDGAR no later than 21 days before the anticipated date of effectiveness of the registration statement. If an EGC has any communications which come within the definition of road show or has test-the-water communications which do not meet the test of Section 5(d), the registration statement must be filed at least 21 days before those communications.
The initial confidential submission and all amendments must be filed as exhibits to the first registration statement filed on EDGAR, with each confidential submission filed as a separate Exhibit 99.
If an EGC is eligible to submit its registration statement on a confidential basis, the SEC Staff will not object if the EGC switches to the confidential submission process for future amendments rather than withdrawing the registration statement and confidentially submitting a new draft registration statement. If an EGC switches to the confidential submission process, the original public filing of the registration statement will not satisfy the requirement to publicly file the registration statement not later than 21 days before the road show.
An EGC which is using the confidential registration statement process may not rely on the Securities Act Rule 134 safe harbor for communications about its offering until it has filed a registration statement that satisfies the requirements of Rule 134.
The confidential submission process is not available for Exchange Act-only registration.
For more information on relief the JOBS Act provides for EGCs, see Practice Notes, JOBS Act: On-ramp to the Capital Markets for Emerging Growth Companies Summary (www.practicallaw.com/1-518-7351) and Road Map to the Jumpstart Our Business Startups (JOBS) Act of 2012 (www.practicallaw.com/6-518-6858).