December 1, 2008, the third anniversary of the effective date for the
securities offering reform rules, is only a few weeks away. That means that it
is time for issuers with shelf registration statements to review their
situations and determine when they need to put up their next shelf. The answer
could be as early as December 1. Below are our “Top 5” recommendations for these
1. Determine the expiration date for your current shelf registration
statements on file with the SEC.
December 1, 2008: Expiration date for all shelf registration
statements that became effective before December 1, 2005, regardless of the
length of time the shelf registration statement has been effective.
Third anniversary of effectiveness: Shelf registration statements that
became effective on or after December 1, 2008 expire three years after their
Note: The reform rules regarding expiration generally cover offerings
by well-known seasoned issuers registered on automatic shelf registration
statements and continuous or delayed primary offerings pursuant to Rule 415.
Certain types of offerings are expressly excluded from these reform rules. These
include, for example, offerings made pursuant to Form S-8, dividend reinvestment
plan offerings solely to existing shareholders and exchange offers.
2. Confirm your Form S-3 eligibility.
Each time a shelf registration statement is filed, an issuer has to be
eligible to use Form S-3. Generally an issuer must (i) have a class of
securities registered pursuant to Section 12(b) of the Securities Exchange Act
of 1934 (the “Exchange Act”), (ii) have been subject to public reporting
requirements of the Exchange Act for 12 months immediately preceding the filing
of a shelf registration statement, (iii) have been timely in filing those
reports and (iv) have an aggregate market value of voting and non-voting common
equity held by non-affiliates of $75 million or more.
See General Instruction
I to Form S-3 for the complete list of conditions a registrant must meet for
use of Form S-3.
3. Check your WKSI status.
An issuer can file a shelf registration statement that is automatically
effective if it is a well-known seasoned issuer (“WKSI”) as of a date within the
60 days preceding the filing of the shelf registration statement. With the
recent market turmoil, issuers may have unknowingly lost their WKSI status. One
way to qualify for WKSI status is if an issuer has a worldwide market value of
its outstanding voting and non-voting common equity held by non-affiliates of
$700 million. An issuer will qualify as a WKSI as long as it has met this market
capitalization requirement on at least 1 day in the 60 days prior to filing the
shelf registration statement.
If an issuer does not qualify as a WKSI under the market capitalization test,
it may qualify if it has issued in the last three years at least $1 billion
aggregate principal amount of registered non-convertible securities, other than
common equity, in primary offerings for cash.
Rule 405 of the Securities Act for the complete list of requirements to be
eligible for WKSI status.
4. Determine when your new shelf registration statement needs to be
Once an issuer has determined when old shelf registration statements expire
and has confirmed that it is still eligible to use Form S-3, the issuer should
determine whether it needs to file a new shelf registration statement before the
expiration of the old shelf registration statements. For example, if you have an
ongoing offering, you will want to be sure there is no gap in effectiveness when
the old shelf registration statement expires. This would be the case if you
registered both convertible notes and the common stock into which it is
convertible on your old shelf registration statement and the notes are currently
convertible. Another example would be a registration statement for a direct
stock purchase plan that allows first share acquisitions by plan participants.
In these cases, the new shelf registration statement needs to be effective
before the old shelf registration statement lapses and needs to cover the
specific securities that are the subject of the continuing offering, as well as
securities to be offered in the future. (Registration fees previously paid in
connection with the ongoing part of the offering should be transferable to the
new registration statement. See # 5 below.)
Similarly, if an issuer is engaged in or contemplating an offering that will
have an over-allotment option associated with it, it should consider not only
the anticipated timing of the initial offering, but also the length of the
over-allotment option period (typically 30 days) to determine if it is necessary
to file the new shelf registration statement before the over-allotment option
period is over. In many cases, it will be simpler to make the filing before the
offering occurs at all, and if the issuer is not a WKSI and eligible for
automatic effectiveness, even more advance planning may be required.
Once you have determined when you need your new shelf to be effective, you
will need to determine when you need to file in order to accomplish your goal.
If you are a WKSI, your filing will be automatically effective which is very
helpful from a timing standpoint. If you are not a WKSI, you will want to allow
time for possible SEC review. In addition to preparing the registration
statement itself, keep in mind that you will need Board approval for the filing,
Board signatures on the registration statement (or powers of attorney) from a
majority of the Board members, as well as the CEO, CFO and CAO. You will need a
consent from the independent auditor, and they have procedures they must
complete before issuing a consent. You will need legal opinions and T-1's from
the trustees under any indentures for debt securities to be registered.
Subsidiary guarantees, or recent or soon to be consummated acquisition and
divestiture transactions can further complicate matters with required footnote
disclosures or pro formas that may not yet be available. These are the same
considerations you have with any shelf, but with the additional factor of the
reform rules deadline, it will be best to think them through as early as
5. Carry forward your unused registration fees if you can.
Issuers who paid registration fees at the time of filing an old shelf
registration statement or at the time of a previous take-down, if the old
registration statement was filed under the reform rules and the registration
fees were handled on a pay-as-you-go basis under Rule 456(b) under the
Securities Act of 1933 (the “Securities Act”), should check to see if there is
unused capacity on the old shelf and if there are unused fees for unsold
securities in ongoing offerings from that shelf registration statement. For
example, filing fees already paid for convertible notes offerings, which
included the fee for the associated common stock, should be able to be carried
forward to the new shelf registration statement. If there is unused capacity,
issuers should carry forward the fees related to the unsold securities, if
Under Rule 457(p), the aggregate total dollar amount of the filing fee
associated with those unsold securities may be offset against the total filing
fee due for a new shelf registration statement. The new shelf registration
statement must be filed within five years of the initial filing date of the old
shelf registration statement, and must be filed by the same registrant, a
majority-owned subsidiary of that registrant, or a parent that owns more than 50
percent of the registrant’s outstanding voting securities. A note should be
added to the “Calculation of Registration Fee” table in the new shelf
registration statement stating the dollar amount of the filing fee previously
paid that is offset against the currently due filing fee, the file number of the
old shelf registration statement from which the filing fee is offset, and the
name of the registrant and the initial filing date of the old shelf registration
statement. Note: When the rule refers to the registration statement from
which the filing fee is offset, it is the SEC staff’s position that it means the
registration statement with which the fees were originally paid, even if those
fees have been carried forward to a later registration statement.
In addition to adding a note to the “Calculation of Registration Fee” table
on the new shelf registration statement, the issuer’s filing agent preparing the
EDGAR submission header needs to include all of the required tags to let the SEC
know that filing fees are being carried forward from an old shelf registration
Certain information also needs to be noted when a takedown offering is done
off of the new shelf registration statement on a pay-as-you-go basis under Rule
456(b). The final prospectus supplement should include an updated “Calculation
of Registration Fee” table that references the new shelf registration statement
file number and the earlier shelf registration statement file number(s) noting
that the fees were paid in association with that old shelf registration
statement(s). Again the term “earlier registration statement” is read by the
staff to mean the registration statement with which the fees now being used were
originally paid, which is not necessarily the one from which they are being
Money saving hint during uncertain economic times: The current filing
fee is $39.30 million dollars of securities registered. This filing fee will
increase to $55.80 per million dollars within 5 days of the date upon which the
SEC receives its appropriation for the 2009 fiscal year. WKSIs that are
contemplating offerings in the not too distant future may want to prepay the
registration fee at the old rate at the time of filing the new shelf
registration statement rather than using the pay-as-you-go option under Rule
456(b). Depending on the time of the offering, the new fee could be at the
McGuireWoods LLP assists clients with public and private offerings of equity,
debt and hybrid securities and complying with their corporate governance and
public reporting obligations, actively monitors securities regulatory
developments and regularly counsels public companies on compliance issues. For
additional assistance with shelf registration statements or any other registered
or unregistered offering issues, please call your regular McGuireWoods contact,
or one of the lawyers listed.