Section 12 Registration Requirements
January 20th, 2009
Just wanted to throw up a quick guide for companies recently registered under Section 12 of the 1934 Exchange Act. Many companies out there filed an S-1 or an SB-2 to get registered for trading with the SEC, but have never had their shares properly registered through Section 12 as required by the OTC and any other trading market or exchange in the US. Here are some of the benefits and obligations connected with Section 12 registration.
Rule 144 – 6 month hold
- 90 days after the company files a registration statement registering a class of securities under Section 12 of the Securities Act of 1933 (such as an 8-A), the company’s securities, sold under exemptions from registration requirements, will be subject to only a six month hold.
Directors, officers and 10% shareholder (Insider) filings
- Insiders have to file:
- Initial ownership statement
- Change of ownership statement within 2 days of sale or purchase of the company’s securities
- Upon the acquisition of 5% or more of the company’s issued and outstanding shares, a Schedule 13D must also be filed providing details regarding the purchaser
Short Swing Rule
- Insiders have to return any profits made on the acquisition and sale of the company’s securities within a 6 month period
- This means that if you buy stock in January for 1 dollar and sell stock in May for 2 dollars you have to pay the company one dollar.
- If you buy stock in January for 1 dollar and don’t sell until August, then you do not have to pay out the profits
Proxy and Information Circulars
- Proxy and Information circulars: These will be required whenever the company undertakes any action which requires shareholder approval. Even if you get majority approval in writing, the company will still have to prepare these documents and file them with the SEC
Change of Directors
· If pursuant to any agreement or understanding with a person buying 5% or more of the company’s securities, the company agrees to appoint a majority of its directors, a 14F filing is required (usually when a reverse takeover occurs). This is a relatively detailed filing outlining the change and the new ownership structure. Additionally, a 14F filing requires that 10 days pass from the day that the filing is submitted to the SEC to when the company can implement the appointment in directors.
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