CORPORATE TRANSACTIONS & COMPLIANCE BLOG

Appointing a Process Agent in Registration Statements Filed with the SEC

By: Colleen DeVries, COGENCY GLOBAL INC. on Wed, Feb 15, 2017

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As the economies and business conditions in emerging markets go through inevitable ups and downs, the demand for global stock offerings rises and falls. During times of growth and favorable conditions, foreign companies attracted by flexible exchange rules and liquid stock exchanges frequently turn to the U.S. as a source of raising capital. For example, a recent Bloomberg article reports an increase in public offerings in the U.S. by companies in Brazil after a recession-induced lull.

A number of legal transactions, either by statute or contract, require the naming of an agent for service of process (also referred to as process agent or contract agent). This is one of the requirements for foreign companies seeking a public offering in the U.S. In this type of securities offering, the process agent serves as the point of contact upon which legal process may be served in any action arising out of the securities offering against the foreign issuer. Our blog post, “Appointing a Process Agent in Multijurisdictional Cross-Border Transactions,” discussed naming a process agent as a contractual requirement within an international commercial agreement. In this article, we examine the appointment of a process agent by foreign private issuers of securities in the U.S. market, as required pursuant to the regulations of the Securities Act of 1933, as amended (“Securities Act”), and the Securities Exchange Act of 1934, as amended (“Exchange Act”).

Securities Act and Exchange Act Disclosure Requirements
Generally, the Securities Act requires companies wishing to offer and sell securities in the United States to register the issuance with the SEC by filing one of a series of registrations statements or to comply with the requirements to deem the issuance exempt from such registration.

The Exchange Act requires companies to register classes of equity securities in order to list these securities on a national securities exchange in the United States. The Exchange Act also requires companies to make periodic filings with the Commission to disclose information about their business operations, financial condition and management.

Foreign private issuers registering to sell securities in the U.S. will be required to file a detailed disclosure form with the SEC on one of a series of forms prescribed by the regulations under the Securities Act. Depending on the nature of the issuance and to whom the securities will be offered, the level of disclosure will vary.

SEC Registration Statements Requiring Designation of “Agent for Service”
The name, address in the U.S. and phone number of an “agent for service” (as defined under section 230.100 of the General Rules and Regulation of the Securities Act) are required to be listed on the cover page of the following SEC registration statements:

  • SEC Form F-1 - a foreign private issuer publicly selling securities for the first time in the U.S. will register the securities on SEC Form F-1. This registration form requires a higher level of disclosure than some of the other SEC registration forms.
  • SEC Form F-3 – a short form registration statement used by foreign private issuers that have previously completed registered offerings in the U.S.
  • SEC Form F-4 – a registration statement filed in connection with business combinations and exchange offers.
  • SEC Form F-6 – used to register depositary shares evidenced by American Depositary Receipts.
  • SEC Form S-8 – used to register securities issued to employees under an employee benefit plan.

In addition to receipt of legal proceedings, the agent for service is also required and authorized in the registration statement to receive notices and communications from the SEC.[i]

Unlike a contractual transaction, in which the terms of the agreement are likely to identify a fixed term of the agreement and term for the process agent, a foreign issuer is required to retain the process agent for an indefinite period of time for as long as the securities are registered.

Timing of Process Agent Appointment is Critical
As mentioned in prior posts, successfully coordinating the timing of the appointment of the process agent is critical. The timing of the electronic filing the registration statement via EDGAR (Electronic Data Gathering, Analysis, and Retrieval system) and for pricing the stock offering is very well orchestrated among the transaction parties. Therefore, the acceptance of the process agent at least a day in advance of the filing is prudent. While the acceptance of the process agent is one of the smaller matters on a pre-filing conditions precedent list, its importance should not be overlooked.  Not having the consent of the process agent in advance of the scheduled submission date may cause a delay in the filing with the SEC resulting in serious consequences to all parties.

In addition to the foreign private issuer naming an agent for service in the registration statement, in some cases, naming a U.S. Duly Authorized Representative(“USDAR”) is also required. The roles of the agent for service and the USDAR are different, but equally important to be in place prior to filing with the SEC. Future blog posts will include a discussion of the appointment of a USDAR and explore securities issuances by foreign private issuers that are exempt from the SEC registration requirements.

[i] For more information about the SEC registration forms, requirements and to obtain copies of the forms, you can access them directly from the SEC site at http://www.sec.gov/forms.

 

This article is provided for informational purposes only and should not be considered, or relied upon, as legal advice.

 

Topics: Process Agent