What is a Small Corporate Offering Registration (SCOR)
A Small Corporate Offering Registration (SCOR) is a simplified means for smaller companies to raise capital by issuing shares. SCOR provides an exemption from the normal registration requirements of federal securities laws for companies that offer and sell up to $1 million of their securities in any 12-month period. Aside from raising capital, SCOR may be employed as a part of succession planning and other business ownership and liquidity-related purposes. A Small Corporate Offering Registration is often referred to by its Securities and Exchange Commission (SEC) rule name, "Rule 504 of Regulation D" or "Reg D of Rule 504." It is often referred to as an over-the-counter sale of securities, as the securities are not traded on an exchange. Instead, they may be traded directly between brokers and dealers either online or over the phone.
Breaking Down Small Corporate Offering Registration (SCOR)
The SCOR registration was enacted to give smaller companies better access to capital. Most bank loans go to larger companies in spite of the fact that small businesses account for half of U.S. gross national product (GNP). The SCOR registration documentation, with its question and answer format and electronic filing, is easier to fill out and may be completed without the assistance of a certified public accountant (CPA) or a securities lawyer. Such a filing may be made without registering with the SEC. Companies can use several means to sell their shares, such as selling agents who are paid on commission, or by the internet or traditional advertising. There is no limit on how many buyers or type of buyer. An entire SCOR offering may be sold to a single buyer as part of a succession plan or outright sale of a business. U.S and Canadian corporations and LLCs that meet certain guidelines may file for a SCOR registration.
Small Corporate Offering Registration (SCOR) Filing
Companies that are in compliance with regulation 504 do not have to file with the SEC to make an offering but do have to file a Form D. This electronic form is a brief notice to regulators that contains the names and addresses of a company's executives, directors and promoters, some key information about the offering, and little else. Such filings can be found in the SEC's EDGAR database and must be made no later than 15 days after the first sale of securities in the offering. For more, see Filing a Form D Notice from the SEC.
Small Corporate Offering Registration (SCOR) Requirements
There are a number of requirements a company must meet to qualify for a SCOR registration. For example:
- Financial statements: Statements from the filing company's last fiscal year must be attached. They need not be audited but it is generally better if they are. They should be prepared using in accordance with generally accepted accounting principles (GAAP).
- Offering Details: SCOR may be used to register offerings of common or preferred stock (including convertible preferred) and options, warrants, or rights, and membership interests in an LLC. Shares must be priced at a minimum of $1; up to $1 million may be issued in any 12-month period.
- Company Types: Several types of companies are NOT permitted to use the SCOR program. They include: partnerships, petroleum exploration and production companies; mining and other extraction companies; holding or portfolio companies; commodity pools, equipment leasing or real estate programs; blind pools, companies regulated by a regulator other than the SEC; certain public companies and a few other exceptions. For more, see the state of Washington's guide to SCOR programs.
Small Corporate Offering Registration (SCOR) State Requirements
Individual states may have their own SCOR program filing requirements. New Jersey, for example, requires the filing of several forms and the payment of fees.The forms are:
- Form U-1: Uniform Application to Register Securities
- Form U-2: Uniform Consent to Service of Process
- Form U-2A: Uniform Form of Corporate Resolution
- Form U-7: Small Corporate Offering Registration (SCOR)
- Form NJBOS-3: New Jersey addendum to registration