• Is the "Shelf Life of Your Registration Statement About to Expire? It's Time to Determine Whether You Need New Shelf Registration Statements
  • August 10, 2008
  • Law Firm: O'Melveny & Myers LLP - Office
  • Included in the SEC’s 2005 “Securities Offering Reform” rules were two little-noticed changes to Securities Act Rule 415 -- the shelf registration rule. One of these changes eliminated the esoteric requirement that the amount of securities registered on a shelf registration statement had to be limited to the amount intended to be offered within two years. Related to the first change, the second change limited the life of certain shelf registration statements to three years. This three-year “shelf life” will begin to expire for a number of registration statements on December 1, 2008. Fortunately, the SEC made it easy to deal with this expiration -- if companies plan for it properly.

    Registration Statements Subject to the Three-Year “Shelf Life”

    Under the shelf registration rule, the following types of registration statements expire after three years:

    • Securities registered on an automatic shelf registration statement (which is available only to “well-known seasoned issuers” or “WKSI’s”);
    • Securities registered for offerings that will be commenced promptly after the effectiveness of the registration statement and will be made on a continuous basis (Rule 415(a)(1)(ix));
    • Securities registered (or qualified to be registered) on Form S-3 or Form F-3 that are to be offered and sold on an immediate, continuous or delayed basis by or on behalf of the registrant, a majority-owned subsidiary of the registrant, or a person of which the registrant is a majority-owned subsidiary (Rule 415(a)(1)(x)); and
    • Mortgage related securities, including such securities as mortgage backed debt and mortgage participation or pass through certificates (Rule 415(a)(1)(vii)).

    Registration Statements That Are NOT Subject to the Three-Year “Shelf Life”

    The SEC’s rulemaking is very clear that the three-year expiration applies only to the offerings specified above. As such, unless they are automatic shelf registration statements, the following types of registration statements do not expire after three years:

    • Resale Registration Statements -- Securities which are to be offered or sold solely by or on behalf of a person or persons other than the registrant, a subsidiary of the registrant or a person of which the registrant is a subsidiary -- (Rule 415(a)(1)(i));
    • Registration Statements for Dividend Reinvestment Plans -- Securities which are to be offered and sold pursuant to a dividend or interest reinvestment plan of the registrant -- (Rule 415(a)(1)(ii));
    • Registration Statements for Employee Benefit Plans -- Securities which are to be offered and sold pursuant to an employee benefit plan of the registrant -- (Rule 415(a)(1)(ii));
    • Registration Statements Covering Exercises of Options, Warrants, or Rights -- Securities which are to be issued upon the exercise of outstanding options, warrants or rights -- (Rule 415(a)(1)(iii));
    • Registration Statements Covering Conversions -- Securities which are to be issued upon conversion of other outstanding securities -- (Rule 415(a)(1)(iv));
    • Registration Statements Covering Collateral -- Securities which are pledged as collateral -- (Rule 415(a)(1)(v));
    • Registration Statements Covering ADRs -- Securities which are registered on Form F-6 -- (Rule 415(a)(1)(vi));
    • Registration Statements Covering Business Combinations -- Securities which are to be issued in connection with business combination transactions -- (Rule 415(a)(1)(viii)); and
    • Certain Investment Company Registration Statements -- Shares of common stock which are to be offered and sold on a delayed or continuous basis by or on behalf of a registered closed-end management investment company or business development company that makes periodic repurchase offers pursuant to [Investment Company Act Rule] 23c-3 -- (Rule 415(a)(1)(xi)).[1]

    How to Calculate the Three-Year “Shelf Life”

    The SEC staff has given very clear guidance regarding the calculation of the expiration date for a shelf registration statement that is subject to the three-year expiration requirement. In this regard, the SEC staff provided the following:
    Included in the SEC’s 2005 “Securities Offering Reform” rules were two little-noticed changes to Securities Act Rule 415 -- the shelf registration rule.  One of these changes eliminated the esoteric requirement that the amount of securities registered on a shelf registration statement had to be limited to the amount intended to be offered within two years.  Related to the first change, the second change limited the life of certain shelf registration statements to three years.  This three-year “shelf life” will begin to expire for a number of registration statements on December 1, 2008.  Fortunately, the SEC made it easy to deal with this expiration -- if companies plan for it properly. 

    Registration Statements Subject to the Three-Year “Shelf Life”

    Under the shelf registration rule, the following types of registration statements expire after three years:

    • Securities registered on an automatic shelf registration statement (which is available only to “well-known seasoned issuers” or “WKSI’s”);
    • Securities registered for offerings that will be commenced promptly after the effectiveness of the registration statement and will be made on a continuous basis (Rule 415(a)(1)(ix));
    • Securities registered (or qualified to be registered) on Form S-3 or Form F-3 that are to be offered and sold on an immediate, continuous or delayed basis by or on behalf of the registrant, a majority-owned subsidiary of the registrant, or a person of which the registrant is a majority-owned subsidiary (Rule 415(a)(1)(x)); and
    • Mortgage related securities, including such securities as mortgage backed debt and mortgage participation or pass through certificates (Rule 415(a)(1)(vii)).

    Registration Statements That Are NOT Subject to the Three-Year “Shelf Life”

    The SEC’s rulemaking is very clear that the three-year expiration applies only to the offerings specified above.  As such, unless they are automatic shelf registration statements, the following types of registration statements do not expire after three years:

    • Resale Registration Statements -- Securities which are to be offered or sold solely by or on behalf of a person or persons other than the registrant, a subsidiary of the registrant or a person of which the registrant is a subsidiary -- (Rule 415(a)(1)(i));
    • Registration Statements for Dividend Reinvestment Plans -- Securities which are to be offered and sold pursuant to a dividend or interest reinvestment plan of the registrant -- (Rule 415(a)(1)(ii));
    • Registration Statements for Employee Benefit Plans -- Securities which are to be offered and sold pursuant to an employee benefit plan of the registrant -- (Rule 415(a)(1)(ii));
    • Registration Statements Covering Exercises of Options, Warrants, or Rights -- Securities which are to be issued upon the exercise of outstanding options, warrants or rights -- (Rule 415(a)(1)(iii));
    • Registration Statements Covering Conversions -- Securities which are to be issued upon conversion of other outstanding securities -- (Rule 415(a)(1)(iv));
    • Registration Statements Covering Collateral -- Securities which are pledged as collateral -- (Rule 415(a)(1)(v));
    • Registration Statements Covering ADRs -- Securities which are registered on Form F-6 -- (Rule 415(a)(1)(vi));
    • Registration Statements Covering Business Combinations -- Securities which are to be issued in connection with business combination transactions -- (Rule 415(a)(1)(viii)); and
    • Certain Investment Company Registration Statements -- Shares of common stock which are to be offered and sold on a delayed or continuous basis by or on behalf of a registered closed-end management investment company or business development company that makes periodic repurchase offers pursuant to [Investment Company Act Rule] 23c-3 -- (Rule 415(a)(1)(xi)).[1]

    How to Calculate the Three-Year “Shelf Life”

    The SEC staff has given very clear guidance regarding the calculation of the expiration date for a shelf registration statement that is subject to the three-year expiration requirement.  In this regard, the SEC staff provided the following:

    Q: When does the three-year period specified in Rule 415(a)(5) begin for shelf registration statements?

    A: The answer will depend on whether the registration statement became effective before December 1, 2005, as follows:

    • For any shelf registration statement that is effective before December 1, 2005, the three-year period will begin on December 1, 2005, regardless of the length of time the shelf registration statement has been effective as of that date; and
    • For any shelf registration statement that becomes effective on or after December 1, 2005, the three-year period will begin on the effective date of that shelf registration statement.

    How to Deal With the Expiration of Shelf Registration Statements

    For applicable shelf registration statements that were in effect before the rule became effective on December 1, 2005, and for registration statements such as automatic registration statements filed by companies when the rule became effective, the end of their three-year terms will be reached and they will expire as early as December 1, 2008.  Therefore, public companies must be in a position to replace those expired shelf registration statements. 

    Fortunately, the SEC’s rules provide companies with an opportunity to assure that there is not a gap in their on-going registered offerings.  Vital to the elimination of a gap in a company’s on-going registered offerings is the requirement that any “replacement” registration statement be filed before the end of the three-year period for the “original” registration statement.  Consequently, public companies must begin to determine the proper response to the “shelf life” rule now. 

    Due to the importance of filing “replacement” registration statements in a timely manner, now is the time for companies to examine each of their existing shelf registration statements to determine if they are subject to the three-year “shelf life” rule.  For any such registration statements, companies should determine the expiration date for those registration statements and take the proper steps to plan for the filing of “replacement” registration statements before the expiration date for their existing registration statements.

    If a company plans properly and files its “replacement” registration statements before the end of the three-year “shelf life” for its existing registration statements, Rule 415 provides that a gap will be avoided as follows:

    • If the “replacement” registration statement is an automatic shelf registration statement, it will become effective upon filing and there will not be a gap in the on-going registered offering;
    • If the “replacement” registration statement is not an automatic shelf registration statement, the company may continue to offer and sell securities covered by the “original” registration statement until the earlier of:
      • 180 days after the expiration of the three-year period for the “original” registration statement; or
      • The time the “replacement” registration statement becomes effective; and
    • If the “replacement” registration statement is not an automatic shelf registration statement, the company may continue to proceed with a continuous offering of securities that began during the three-year period for the “original” registration statement until the “replacement” registration statement becomes effective.

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    [1] This Client Alert does not address offerings by investment companies.