Small Company Offering Registration – Definition

Cite this article as:"Small Company Offering Registration – Definition," in The Business Professor, updated September 12, 2019, last accessed October 20, 2020, https://thebusinessprofessor.com/lesson/small-company-offering-registration-definition/.

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Small Corporate Offering Registration (SCOR) Definition

A Small Corporate Offering Registration (SCOR) is an approach used by small firms to generate capital through the issuance of shares. SCOR is otherwise called the “Rule of 504 of Regulation D” or “Reg D of Rule 504.” SCOR is a provision that allows small firms for issue or sell securities uo to $1million within a 12-month period, without going through the normal registration requirements.

SCOR is granted by the Securities and Exchange Commission, this allows for over-the-counter trade of securities in order for small companies to raise capital.

A Little More on What is a Small Corporate Offering Registration (SCOR)

Typically, a Small Corporate Offering Registration (SCOR) allows small companies sell their securities directly to brokers and dealers without the need to go through an exchange. The Securities and Exchange Commission (SEC) enacted SCOR so that smaller companies can raise capital easily once they complete the registration. Smaller companies can complete the SCOR documentation without any assistance for a CPA, the registration is straightforward and easy to do. There are guidelines that smaller companies must follow when filing a SCOR registration as stipulated by the SEC. Companies can sell shares to buyers online or over the phone. They can also sell to agents or dealers who are paon commission.  It is possible for a company to sell its entire offering to a single buyer in the case of an outright sale of business or a succession.

Small Corporate Offering Registration (SCOR) Filing

Smaller companies who comply with the 504 regulation may not need to do a SCOR registration with the Securities and Exchange Commission, rather, all they need is to file a Form D stating the issuance of security. Form D filings are also kept by the SEC and collected in a database. Companies that are compliant with the regulation 504 are required to file a form D not more than 15 days after the first offering and sale of securities. Also, when filing a SCOR, the registration must contain basic information about the company and about the offering itself. The SEC keeps all SCOR filings in a safe database which can easily be referred to when there is a need to cross check information.

Small Corporate Offering Registration (SCOR) Requirements

There are three basic requirements that a company must meet before it can qualify for a SCOR registration, these requirements are;

  • Company type: the only categories of companies allowed to register for SCOR are smaller businesses and LLCs. Partnerships, institutional companies and companies with other regulators aside from the SEC cannot use the SCO provision.
  • Details of Offering: Smaller companies who use the SCOR program can issue securities up to $1million and each priced at the minimum of $1 within a period of 12 months.
  • Financial statements: All smaller companies filing for a SCOR registration are required to attach their financial statements for the previous fiscal year. The financial statement must be compiled following the guidelines of generally accepted accounting principles (GAAP).

Small Corporate Offering Registration (SCOR) State Requirements

The requirements for filing a SCOR registration differ from state to state, depending on the rules guiding different states. For instance, New Jersey has the following requirements for SCOR to be filed;

  • New Jersey addendum to registration (Form NJBOS-3)
  • Small Corporate Offering Registration (SCOR) – Form U-7
  • Uniform Application to Register Securities (Form U-1)
  • Uniform Consent to Service of Process (Form U-2)
  • Uniform Form of Corporate Resolution (Form U-2A)

References for “Small Corporate Offering Registration (SCOR)

https://www.investopedia.com/terms/s/small-corporate-offering-registration-scor.asp

https://www.upcounsel.com/small-corporate-offering-registration

https://financial-dictionary.thefreedictionary.com/Small+Corporate+Offering+Registrat…

https://smallbusinessschool.org/page2275.html

https://www.hg.org/legal-articles/scor-offerings-l-state-blue-sky-laws-30593

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