Going Public Benefits for Foreign Companies

Foreign companies seeking to raise capital often turn to the U.S. capital markets.  Foreign issuers can rely on exemption from registration or register a securities offering with the SEC. Among those benefits to foreign companies are reduced disclosure obligations and relaxed financial statement requirements for those who qualify as foreign private issuers.

Qualification as a foreign private issuer is not determined by the issuer's country of domicile or the location of its operations or assets.

Rule 405 of Regulation C of the Securities Act of 1933 (the "Securities Act") and Rule 3b-4 under the Securities Exchange Act of 1934 (the "Exchange Act") set forth the qualification requirements for companies seeking to take advantage of foreign private issuer status.

If a foreign company does not qualify as a foreign private issuer, it will be subject to the same registration and disclosure requirements applicable to domestic reporting companies.

Benefits of Foreign Private Issuer Status

Some of the benefits foreign private issuer status include:

• filing a registration statement under the Securities Act on Form F-1 instead of Form S-1;

• registering a class or classes of securities under the Securities Exchange Act on a registration statement under the Exchange Act on Form 20-F instead of Form 10;

• flexible financial statement requirements;

• exemption from proxy rules; and

• reduced ongoing disclosure requirements.

Definition & Determination of Foreign Private Issuer Status

Foreign private issuer status is not determined solely by the country in which a company is formed or where its operations or assets are located. The SEC established two tests to determine whether a foreign company qualifies as a foreign private issuer. It will qualify as a foreign private issuer if 50% or less of its outstanding voting securities are held by U.S. residents; or if more than 50% of its outstanding voting securities are held by U.S. residents and none of the following three circumstances applies: the majority of its executive officers or directors are U.S. citizens or residents; more than 50% of the issuer's assets are located in the United States; or the issuer's business is administered principally in the United States.

SEC Forms Applicable to Foreign Private Issuers

Foreign private issuers may use particular registration and reporting forms and schedules designed specifically for them. These forms are described below.

Registration Statements under the Securities Act for Foreign Issuers

• Form F-1 is the form prescribed for registration statements covering initial public offerings and other first-time registration statements of foreign private issuers, and is the default form for transactions for which no other form is authorized or prescribed.

• Form F-3 is a "short form" registration statement that allows foreign issuers to incorporate their annual report and other reports by reference into the registration statement. Form F-3 is available to foreign private issuers that have been subject to Exchange Act reporting requirements for at least 12 months, have filed all required reports in a timely manner during that time, have filed at least one annual report on Form 20-F, have not defaulted on certain payment obligations, and have an aggregate worldwide public float of common stock of at least $75 million.

• Form F-4 is the registration statement prescribed for business combinations and exchange offers.

• Form F-6 is the registration statement form for American Depositary Receipts.

Exchange Act Registration Statements For Foreign Issuers

Form 20-F is the registration statement generally used by foreign private issuers to register securities under Section 12(b) of the Exchange Act . Foreign private issuers that voluntarily register their securities under Section 12(g) may also file a Form 20-F to register their securities under the Exchange Act.

Foreign private issuers that meet certain shareholder and asset thresholds both globally and within the United States and that do not qualify for the Rule 12g3-2(b) exemption are required to register using Form 20-F under Section 12(g) of the Exchange Act.

Canadian issuers may use Form 40-F, also known as the Registration and Annual Report for Canadian Securities Form, as an initial registration statement.

Annual Reports on Form 20-F Requirements for Foreign Issuers

Foreign private issuers file annual reports on Form 20-F as opposed to Form 10-K. They are required to file Form 20-F within four months of the end of the fiscal year. Foreign issuers are not required to file quarterly reports such as those filed by domestic issuers on Form 10-Q.

Current Event Reports on Form 6-K

A foreign private issuer must disclose certain material events on Form 6-K including reports it (i) makes or is required to make public pursuant to the law of its domicile, incorporation, or organization, (ii) files or is required to file with a stock exchange on which its securities are traded and which was made public by that exchange, or (iii) distributes or is required to distribute to its security holders.

Form 6-K refers to general areas of disclosure, including: changes in business;

• changes in business;

• changes in management or control;

• acquisitions or dispositions of assets;

• bankruptcy or receivership;

• changes in its certifying accountants;

• its financial condition and results of operations;

• material legal proceedings;

• changes in its securities or in the security for registered securities;

• defaults upon senior securities;

• material increases or decreases in the securities or indebtedness outstanding;

• the results of the submission of matters to a vote of its security holders;

• transactions with its directors, officers or principal security holders;

• the granting of options or payment of other compensation to its directors or officers; and

• any other information which issuer deems material to its shareholders.

Financial Reports by Foreign Private Issuers

The SEC gives foreign private issuers several alternatives when providing financial statement disclosures in SEC reports and filings. Foreign private issuers may present financial statements including in registration statements under the Securities Act or Exchange Act pursuant to U.S. generally accepted accounting principles ("GAAP"), International Financial Reporting Standards ("IFRS") or their home country with a reconciliation to U.S. GAAP. This provides a flexible cost effective method for foreign private issuers to comply with SEC requirements. This is particularly important to issuers when filing a registration statement for the first time under the Securities Act.