Regulation A+ is a mechanism that was created to address problems and concerns from Regulation A. Regulation A was a mechanism to exempt companies from registering for public offerings per the original requirements of the Securities Act of 1933. Regulation A, however, had a $5 million limit on the amount of capital that could be offered by a company. Moreover, many companies felt the process was not time or cost efficient.
In March 2015, Regulation A+ was created as an alternative means to raise capital. There are two main tiers, or categories, in Regulation A+: Tier 1 and Tier 2. In a one-year period, the former applies to public offerings up to $20 million, while the latter applies to public offerings of up to $50 million.
What are the benefits of Regulation A+?
Regulation A+ is an alternative to the traditional initial public offering (“IPO”), and can be less expensive and time consuming than an IPO. Moreover, companies can decide whether or not they would like to go public before committing to a traditional public offering.
What is the process for Regulation A+?
Companies that would like to raise capital under Regulation A+ are required to file an offering statement, called Form 1-A, with the Securities and Exchange Commission (“SEC”). In doing so, the company must disclose detailed information regarding their company, including any potential risks that may come with the investment. This filing is subject to the SEC’s review, and the SEC may request additional information from the company seeking Regulation A+. Upon approval from the SEC, the company is allowed to go through with the offering, provided that it will follow any additional reporting requirements as necessary.
Can my company be located outside the United States and qualify?
As of now, Regulation A+ is only possible for companies whose principal places of business are located in either the United States or Canada. Moreover, the securities that each company is offering must be qualified for sale in the state where they are being sold.
If your company is considering moving forward with Regulation A+, it is recommended to speak with an attorney or representative at the SEC to ensure that all filing requirements are met.
