Form 10 and Form F-1: Two Specialized Registration Paths

Full Transcript

Welcome to Securities Lawyer 101, the podcast from Hamilton and Associates Law Group in Boca Raton, Florida. Today we're covering two registration forms that serve very specific purposes, the Form ten and the Form F-one.

Let's begin with the Form ten. Unlike an S-one, a Form ten doesn't register an offering. It registers a class of securities under the Securities Exchange Act of 1934. In plain terms, filing a Form ten is how a company becomes subject to Exchange Act reporting requirements without conducting a public offering of its shares.

Why would a company do that? Sometimes it has no choice. Under Section twelve-g of the Exchange Act, a company generally must register a class of equity securities if, as of the last day of its fiscal year, it has more than ten million dollars in total assets and that class is held of record by either two thousand or more people, or five hundred or more people who are not accredited investors.

Other companies file voluntarily. Becoming a reporting company can help support a public trading market, make certain O-T-C Markets tiers available if the issuer satisfies its applicable requirements, and shorten the Rule one-forty-four holding period for existing shareholders from one year to six months, once the company has been reporting for at least ninety days. Form ten is also commonly used in spin-off transactions.

The Form ten contains much of the same information as an S-one: the business, risk factors, financial information, management's discussion and analysis, management, compensation, and audited financial statements. A registration under Section twelve-g generally becomes effective automatically sixty days after filing, even if the SEC staff is still commenting. That means the company's reporting obligations can begin before the review is finished. So a company should only file a Form ten when it is prepared to start reporting.

Now the Form F-one. The F-one is the registration statement used by foreign private issuers for public offerings in the United States. It's the foreign counterpart to the S-one.

Whether a company qualifies as a foreign private issuer depends on a specific test. Very generally, a foreign company qualifies as a foreign private issuer if fifty percent or less of its outstanding voting securities are held by U.S. residents. If more than fifty percent are held by U.S. residents, the company will not qualify if any one of three U.S. business-contact tests is satisfied: a majority of its executive officers or directors are U.S. citizens or residents, more than fifty percent of its assets are located in the United States, or its business is administered principally in the United States. The SEC has been considering whether to revise the foreign private issuer definition, so eligibility should be checked against current rules.

Foreign private issuer status brings real accommodations. These companies may present financial statements under International Financial Reporting Standards as issued by the International Accounting Standards Board. After their offering, they generally file an annual report on Form twenty-F and furnish interim information on Form six-K, instead of the ten-K, ten-Q, and eight-K. Foreign private issuers are also generally exempt from the U.S. proxy rules and from Section sixteen insider reporting.

A voluntary Form ten filing should be evaluated as a long-term operating decision. Automatic effectiveness means a company cannot assume the SEC comment process will finish before reporting obligations begin. The company needs an auditor, disclosure controls, a reporting calendar, and a team prepared to file periodic and current reports. Becoming reporting without adequate resources can quickly produce late filings, financing problems, and shareholder frustration.

For foreign companies, the foreign private issuer analysis should be revisited on the required annual determination date. Ownership can change, directors and officers can change, assets can move, and management of the business can shift toward the United States. Losing foreign private issuer status changes the reporting system and may require significant preparation. A company that waits until the status change is effective may not have enough time to convert its disclosure and governance processes.

Financial reporting also needs early attention. An F-one issuer must determine whether it will use U.S. generally accepted accounting principles, international standards accepted by the SEC, or another permitted basis with reconciliation where required. That choice affects auditors, internal systems, and the timing of the offering. The right path is not simply the form with the shortest name. It is the reporting framework the company can support accurately after the initial filing becomes effective.

The board should approve the reporting path with a clear understanding of the continuing obligation. Management should present the expected filing calendar, audit plan, cost, staffing, and controls, not just the perceived benefit of public status. For foreign issuers, that presentation should also explain the annual status test and the work required if the company later moves into the domestic reporting system.

That's it for this episode. If you're weighing a Form ten or an F-one, call Hamilton and Associates Law Group at five six one, four one six, eight nine five six, or visit Securities Lawyer 101 dot com to speak with a securities attorney. This podcast is for general information only. It is not legal advice, and listening does not create an attorney-client relationship. Securities rules change, so speak with qualified counsel about your specific situation.