Every four years we go through a regulatory dead zone as the SEC prepares for a change in administration with new priorities, new interpretations, and a whole new rulemaking agenda, including the potential unwinding of the prior administration’s rules. While waiting for the significant changes to come, I’ll continue to dive into the endless detailed topics of disclosure and other requirements of the federal securities laws. This week I’ll cover the ongoing requirements associated with an effective registration statement – known as “Undertakings.”
Every registration statement filed pursuant to the Securities Act of 1933 (“Securities Act”), whether by a domestic company or foreign private issuer (“FPI”) requires the registrant to include a statement as to certain affirmative undertakings by such company. Item 512 of Regulation S-K sets forth the undertakings, and registration statements on Forms S-1, S-3, F-1 and F-3 must include all items set forth in Item 512. Registration Statements on Form S-8 need only include the undertakings in Item 512(a), (b) and (h), and any “other applicable undertakings in Item 512.”
Although a portion of the “undertakings” relate to affirmative agreements to update information through prospectus supplements and post-effective amendments, the majority of the rule, relates to affirmative assertions of liability for the contents of the filings.
Item 512 – Undertakings
Undertakings are broken out based on the type of offering, whether the company will be utilizing forward incorporation by reference, and the form used. Item 512 also clarifies and confirms a company’s liability for post-effective amendments. That is, any post-effective amendment filed in accordance with an Item 512 undertaking, is deemed to be a new registration statement relating to the securities offered for sale.
Rule 415 Offerings
The first group of undertakings must be included in any registration statement relying upon Rule 415. Rule 415 sets forth the circumstances in which a company may conduct a delayed or continuous offering of securities, and when such an offering may be priced at-the-market or other than at a fixed price. As a reminder, in general only bona fide secondary offerings or offerings on Forms S-3 or S-4 may be priced at other than a fixed price. For more information see HERE.
A company relying on Rule 415 must affirmatively agree to the following in its registration statement:
- To file a post-effective amendment during any time that the company is making offers or sales to: (x) update to include a Section 10(a)(3) prospectus (which is required to update audited financial statements); (y) to update for any facts or events arising after the effective date which represent a fundamental change to the information in the last prospectus; and (z) to include any material information with respect to the plan of distribution not previously disclosed.
The requirement to file a post effective amendment does not include circumstances in which there is a change in price or volume which is no more than a 20% change in the maximum aggregate offering price set forth in the fee calculation table included in the effective registration statement. In that case, a company may update the price/volume information via a prospectus supplement filed pursuant to Rule 424b).
The requirement to file a post effective to update for a Section 10(a)(3) prospectus and/or reflect material changes does not apply to registration statements filed on Form S-8 which automatically forward incorporate by reference. Likewise, the requirement does not apply to registration statements on Forms S-1, S-3 or F-3 that forward incorporate by reference. Moreover, when a company is using a Form S-3 or F-3, the requirement to update information can be satisfied via a prospectus supplement, such as when completing a take-down transaction.
- To remove from registration, via a post-effective amendment, any securities that remain unsold at the termination of an offering.
- If the company is an, FPI, to file a post-effective amendment to update audited financial statements as required by Form 20-F (see https://securities-law-blog.com/2024/10/08/foreign-private-issuers-sec-registration-and-reporting-and-nasdaq-corporate-governance-part-1/). This provision does not apply where the registration was on Form F-3 and utilizes forward incorporation by reference.
- That for the purposes of determining liability, each prospectus supplement is deemed to be part of the filed registration statement. Where the prospectus supplement relates to a take down from a Form S-3 or F-3, the supplement shall be deemed to be part of the registration statement as of the first date used or the first date of the sale of securities to which the supplement relates. Liability for the contents of a prospectus supplement does not extend to purchasers that purchased securities prior to such prospectus supplement (such as in an earlier shelf take-down).
Item 512 breaks down, but provides essentially the same provisions for prospectus’s relying on Rules 430A, 430B, 430C and 430D. As a reminder, Rules 430, 430A, 430B, 430C, Rule 430D and Rule 431 allow for certain modified prospectus to meet the requirements of Section 10(a). Rule 430 allows the omission of pricing and pricing related information prior to effectiveness. Rule 430A allows for a prospectus to be declared effective without pricing information as long as it is updated with such information prior to use. Rule 430B allows for the omission of certain information at the time of effectiveness as long as prospectus supplement updates are filed when such information becomes available (generally in association with an S-3 or F-3 shelf which is updated by supplements for shelf take-downs). Rule 430C is a catch all for situations that do not fit 430A or 430B. Rule 430D is for asset-backed offerings. Finally, Rule 431 is for use by investment companies.
- For purposes of determining liability for the initial distribution of securities, a company must include the following statement:
The undersigned registrant undertakes that in a primary offering of securities of the undersigned registrant pursuant to this registration statement, regardless of the underwriting method used to sell the securities to the purchaser, if the securities are offered or sold to such purchaser by means of any of the following communications, the undersigned registrant will be a seller to the purchaser and will be considered to offer or sell such securities to such purchaser:
(i) Any preliminary prospectus or prospectus of the undersigned registrant relating to the offering required to be filed pursuant to Rule 424;
(ii) Any free writing prospectus relating to the offering prepared by or on behalf of the undersigned registrant or used or referred to by the undersigned registrant;
(iii) The portion of any other free writing prospectus relating to the offering containing material information about the undersigned registrant or its securities provided by or on behalf of the undersigned registrant; and
(iv) Any other communication that is an offer in the offering made by the undersigned registrant to the purchaser.
For more on free writing prospectus, see HERE.
Filings Utilizing Forward Incorporation by Reference
Where a registration statement will forward incorporate by reference future filed Exchange Act reports, the company must include the following statement:
The undersigned registrant hereby undertakes that, for purposes of determining any liability under the Securities Act of 1933, each filing of the registrant’s annual report pursuant to section 13(a) or section 15(d) of the Securities Exchange Act of 1934 (and, where applicable, each filing of an employee benefit plan’s annual report pursuant to section 15(d) of the Securities Exchange Act of 1934) that is incorporated by reference in the registration statement shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.
Registration Statements on Forms S-4 or F-4
Where securities are being registered on Forms S-4 or F-4, the company must include the following:
- The undersigned registrant hereby undertakes as follows: That prior to any public reoffering of the securities registered hereunder through use of a prospectus which is a part of this registration statement, by any person or party who is deemed to be an underwriter within the meaning of Rule 145(c), the issuer undertakes that such reoffering prospectus will contain the information called for by the applicable registration form with respect to reofferings by persons who may be deemed underwriters, in addition to the information called for by the other Items of the applicable form.
- The registrant undertakes that every prospectus (i) that is filed pursuant to paragraph (h)(1) immediately preceding, or (ii) that purports to meet the requirements of section 10(a)(3) of the Act and is used in connection with an offering of securities subject to Rule 415, will be filed as a part of an amendment to the registration statement and will not be used until such amendment is effective, and that, for purposes of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.
Rule 145(c) in turn, defines an underwriter, for purposes of business combinations with a shell company (such as a SPAC) as “any party to that transaction, other than the issuer, or any person who is an affiliate of such party at the time such transaction is submitted for vote or consent, who publicly offers or sells securities of the issuer acquired in connection with any such transaction.”
Requests for Acceleration/Registration Statements that are Effective Upon Filing
A Form S-8 registration statement and Forms S-3 or F-3 filed by a “well known seasoned issuer” (WKSI) go effective immediately upon filing with the SEC. The following disclosure must be included in all such forms, and in a final pre-effective amendment of any registration statement where acceleration of effectiveness will be requested:
- Any provision or arrangement whereby a company may indemnify a director, office or control person for liability under the Securities Act;
- Any provision or arrangement in the underwriting agreement whereby the company agrees to indemnify the underwriter or control persons of the underwriter; and
- Whether the benefits of such indemnification have been waived by such person.
Moreover, where any of the above provisions exist, the following statement:
Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue.
Finally, in any registration statement relying on Rule 430A (described above), the company must include the following:
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act of 1933, the information omitted from the form of prospectus filed as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the registrant pursuant to Rule 424(b) (1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities Act of 1933, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.
The Author
Laura Anthony, Esq.
Founding Partner
Anthony, Linder & Cacomanolis
A Corporate and Securities Law Firm
Securities attorney Laura Anthony and her experienced legal team provide ongoing corporate counsel to small and mid-size private companies, public companies as well as private companies going public on the Nasdaq, NYSE American or over-the-counter market, such as the OTCQB and OTCQX. For more than two decades Anthony, Linder & Cacomanolis, PLLC has served clients providing fast, personalized, cutting-edge legal service. The firm’s reputation and relationships provide invaluable resources to clients including introductions to investment bankers, broker-dealers, institutional investors and other strategic alliances. The firm’s focus includes, but is not limited to, compliance with the Securities Act of 1933 offer sale and registration requirements, including private placement transactions under Regulation D and Regulation S and PIPE Transactions, securities token offerings and initial coin offerings, Regulation A/A+ offerings, as well as registration statements on Forms S-1, S-3, S-8 and merger registrations on Form S-4; compliance with the Securities Exchange Act of 1934, including registration on Form 10, reporting on Forms 10-Q, 10-K and 8-K, and 14C Information and 14A Proxy Statements; all forms of going public transactions; mergers and acquisitions including both reverse mergers and forward mergers; applications to and compliance with the corporate governance requirements of securities exchanges including Nasdaq and NYSE American; general corporate; and general contract and business transactions. Ms. Anthony and her firm represent both target and acquiring companies in merger and acquisition transactions, including the preparation of transaction documents such as merger agreements, share exchange agreements, stock purchase agreements, asset purchase agreements and reorganization agreements. The ALC legal team assists Pubcos in complying with the requirements of federal and state securities laws and SROs such as FINRA for 15c2-11 applications, corporate name changes, reverse and forward splits and changes of domicile. Ms. Anthony is also the author of SecuritiesLawBlog.com, the small-cap and middle market’s top source for industry news, and the producer and host of LawCast.com, Corporate Finance in Focus. In addition to many other major metropolitan areas, the firm currently represents clients in New York, Los Angeles, Miami, Boca Raton, West Palm Beach, Atlanta, Phoenix, Scottsdale, Charlotte, Cincinnati, Cleveland, Washington, D.C., Denver, Tampa, Detroit and Dallas.
Ms. Anthony is a member of various professional organizations including the Crowdfunding Professional Association (CfPA), Palm Beach County Bar Association, the Florida Bar Association, the American Bar Association and the ABA committees on Federal Securities Regulations and Private Equity and Venture Capital. She is a supporter of several community charities including the American Red Cross for Palm Beach and Martin Counties, Susan Komen Foundation, Opportunity, Inc., New Hope Charities, the Society of the Four Arts, the Norton Museum of Art, Palm Beach County Zoo Society, the Kravis Center for the Performing Arts and several others.
Ms. Anthony is an honors graduate from Florida State University College of Law and has been practicing law since 1993.
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