Small Corporate Offering Registration (SCOR)

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 $5 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 SCOR is often referred to by its Securities and Exchange Commission (SEC) rule name, "Rule 504 of Regulation D" or "Reg D of Rule 504." SCOR is also 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.

Understanding Small Corporate Offering Registrations (SCORs)

SCOR was initially enacted to give smaller companies better access to capital. Most bank loans go to larger companies, even though small businesses account for a large percentage of U.S. gross domestic product (GDP).

Key Takeaways

  • A small corporate offering registration (SCOR) is a slimmed-down filing process that makes it easy for smaller companies to raise capital.
  • The filing requirements for a SCOR are minimal and the shares offered through these registrations are considered to be over the counter.
  • A SCOR can also be used as a form of succession planning, making a family business liquid through a registered share offering.

The SCOR registration documentation, with its question and answer format and electronic filing, is easy to fill out. It may be completed without the assistance of a certified public accountant (CPA) or a securities lawyer. A SCOR filing can 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, selling over the internet, or using traditional advertising. There is no limit on the number or type of buyers. 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 limited liability companies (LLCs) that meet certain guidelines may file for a SCOR registration. 

How to File a Small Corporate Offering Registration (SCOR)

Companies that comply with Regulation 504 do not have to file with the SEC to make an offering, but they 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, as well as some key information about the offering.

Overall, the filing requirements are quite minimal, especially compared to SEC-registered filings. SCOR filings can be found in the SEC's EDGAR database. They must be made no later than 15 days after the first sale of securities in the offering.

Small Corporate Offering Registration (SCOR) Requirements

There are some requirements a company must meet to qualify for a SCOR registration.

  • Financial statements: Statements from the filing company's last fiscal year must be attached. They do not need to be audited, but it is generally better if they are. They should be prepared following 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. Up to $5 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.

Small Corporate Offering Registration (SCOR) Requirements by State

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. If you are looking to raise capital through a SCOR, it is important to check the rules for the state you are operating in.

Article Sources
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  1. U.S. Securities and Exchange Commission. "Rule 504 of Regulation D." Accessed Feb. 2, 2021.

  2. U.S. Small Business Administration, Office of Advocacy, "Small Businesses Generate 44 Percent of U.S. Economic Activity." Accessed Feb. 2, 2021.

  3. North American Securities Administrators Association. "Small Corporate Offering Registration (SCOR)," Download "Small Company Offering Registration Form (Form U-7)." Accessed Feb. 2, 2021.

  4. U.S. Securities and Exchange Commission. "Filing a Form D Notice." Accessed Feb. 2, 2021.

  5. U.S. Securities and Exchange Commission. "Form D." Accessed Feb. 2, 2021.

  6. U.S. Securities and Exchange Commission. "Latest Filings Received and Processed at the SEC." Accessed Feb. 2, 2021.

  7. North American Securities Administrators Association. "Small Corporate Offering Registration (SCOR)." Accessed Feb. 2, 2021.

  8. State of New Jersey. "Small Corporate Offering Registration (SCOR) Instructions." Accessed Feb. 2, 2021.

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