Shelf registration is a simplified method for companies to issue and sell their stock. Rather than filing a multitude of paperwork for the Securities and Exchange Commission (SEC) regulation of each issuance of stock, shelf registration allows a company to file just one registration document with the SEC to issue and sell multiple stocks over a period of three years.
When Do Companies Use Shelf Registration?
Most companies use shelf registration when they want to spread out the issuance of stock. It provides the company with flexibility on the timing of issuing stock, which may be better for business. For example, a company may have financial difficulties and want to issue stock in order to raise money as soon as possible. With a shelf registration, the company does not have to wait through a lengthy registration process that could further harm its financial situation. A company may also find the flexibility of shelf registration advantageous for navigating market fluctuations. If the company makes auto parts, and the car industry is not doing well, the company can wait until the market for cars is up again before issuing its stock.
Requirements and Restrictions Involved with Shelf Registration
However, there are some restrictions on which companies can use shelf registration. First and foremost, the company must have issued and sold stocks in the past; if it hasn’t ever sold stocks, then it cannot file a shelf registration. In addition, the company must be a “well-known, seasoned issuer,” which refers to a calculation of the number of the company’s shares and stock price. It must also not be in violation of any SEC filing requirements during the previous year. If you need any further assistance regarding shelf registrations and proper filing of papers for your company, you should seek the guidance of a licensed attorney.