SEC Registration and Join Stock Companies

Joint Stock Companies and SEC registration

The status of a

  • SEC Registration and Join Stock Companies
    Manish Khanna Image Manish Khanna

    SEC Registration and Join Stock Companies

    • Wednesday 18th of February 2015
    • News

    Joint Stock Companies and SEC registration

    The status of a joint-stock company (JSC) is defined as a type of company, or a joint venture that involves two or more individuals, owning shares of stock in a business. Shares are issued by the entity in return for a financial contribution, with the shareholders permitted to re-allocate their interest by selling their shares to others at any time. Presently, according to company law, a joint-stock company is frequently identified with having possession of an authorized personality that is separated from its shareholders. In addition, a limited liability, whereby shareholders are liable only for the debts of the company, in excess of the monetary value they invested in the company. It is usual for joint - stock companies to be identified as a limited company or corporation.

    Within certain jurisdictions, opportunity exists for the registering of joint-stock companies, without limited liability. In the United Kingdom and other countries which have adopted this form of company law, these entities are known as unlimited companies, while in the United States of America, they are, to some confusingly, known as joint-stock companies. The term “company” in this context, means an entity formed, registered under the auspices of this act or by way of an existing company; (Company Act 1994).

    Company formation

    The companies formed under the prevailing company law are referred to as the registered company, or a corporation that has filed a registration statement with the Securities and Exchange Commission (SEC) prior to its release of a new stock issue. The related market for publicly held companies is generally a segment on which unlisted securities, issued by companies entered in the Register of the SEC are traded. Those companies traded on the market of publicly held companies have obligations of disclosure to the public. This is in accordance with the securities law and acts of the SEC, recorded in the special Register of the Securities and Exchange Commission.

    Upon a decision being made for a business to become a public entity, an underwriter is elected to act as an intermediary between the company and the capital markets during the preliminary Initial Public Offering (IPO) process. Once an underwriter is selected, the associated firm will form a team of underwriting members, consisting of attorneys, independent accountants, and a financial printer. There will be specialist attorneys for underwriting drafts of all the agreements, while the elected company attorneys, advise management about meeting all Securities and Exchange Commission (SEC) regulations.

    Sale of stock and structuring

    A procedure for the selling of stock is that the business owners seek proposals from a selected variety of investment banks and then evaluate bidders on determined criteria. This could be based on their reputation and experience with similar offerings and within the industry, a distribution network, a record of post-offering support, and the proposed form of underwriting arrangement. Other influences include the respective valuations of the company by bidders, as well as the recommended share price.

    Following the structuring of an IPO team, the initial registration statement must then be prepared in accordance with SEC regulations. The main body content of a registration statement is a prospectus with detailed information regarding the company, which includes its financial statements and a management analysis. The latter document is arguably the most important and time-consuming aspect in a company going public. Within this document, the company owners must at the same time, disclose all potential risks confronting the business. Furthermore, they must present themselves and the company in a manner that will convince potential investors they are making a sound investment. This is a section that is generally worded with great care and attention, and then reviewed by attorneys to ensure there is compliance with all Securities and Exchange Commission regulations, related to truthful disclosure.

    Registration and SEC regulations

    There are two primary acts regarding SEC rules and public stock offerings contained in the Securities Act of 1933 and the Securities Exchange Act of 1934. The former relates to the registration of Initial Public Offerings s with the SEC to protect the public against fraud. The latter mentioned is formulated to regulate companies after they become public, outlining the registration and reporting procedures, as well as laws related to insider trading factors.

    When initial registration statement is completed, it is forwarded to the Securities and Exchange Commission for review, a process which can occupy up to two months. During this period, the company attorneys communicate with the SEC in order to determine any required changes in documentation. Also in this period, the financial statements of the company must be audited by independent accountants, in accordance with the rules of the SEC. It is an audit more formal than a general accounting review, providing investors with a significantly greater degree of assurance concerning the financial position of the company!

    At the end of this term, the Securities and Exchange Commission comments on the initial registration statement, which must be addressed by the company and agreement to a final offering price for the shares stated, concluding with the filing of final amendment to the registration statement. Although the actual sale of stock is meant to become effective 20 days after the filing of the final amendment, it is usual for the SEC to grant companies an acceleration option, to make it effective immediately. This action arises from the SEC recognizing that the stock market can change dramatically during a 20-day period.

    The actual selling of shares then occurs from the official offering date, for 7 days thereafter, with the principle investment banker supervising the public sale of the security. During the offering period, investment bankers are allowed to stabilize the security price, by the purchase of shares in the secondary market; a process known as “pegging” and which is permitted for up to ten days following the official offering date. Investment bankers may also support the offering by way of over-allotment, or the selling of up to 15% more stock in a highly demanding market.

    Following a successful offering, the underwriter arranges a meeting with all parties, for the distribution of the funds and settling of all expenses. At this time the transferring agent is given the authority to forward the securities to the new owners. Although an Initial Public Offering closes with the transfer of the stock, the terms of the said offering are not completed, due to the SEC requiring the filing of a number of reports, associated with the appropriate use of funds as determined in the prospectus. Should the IPO be terminated for any reason, the allotted funds are reimbursed to the investors, by the underwriter!

  • Author Info Manish Khanna

    Manish is founder of Business2sell Group of Websites. 

    Business2Sell.com.au is one of the leading business and franchise for sale listing websites. We work with our business brokers, commercial agents, franchisors and private sellers to help them connect with the right buyers for their opportunities. 

    With website now functional in Australia, United States, United Kingdom, Canada, New Zealand and South Africa. We have over 18,000 businesses for sale listed, with over 220 Business Broker and Commercial Agent. 

    I have over 20 years of experience in Web Industry; I have been involved in websites industry since the early years of 1996-97. In my professional career I may have worked for over 10,000+ websites. My Specialty is to build portals or complex online applications.