Tag Archives: sec filer

What is Schedule 13D?

Schedule 13D is known as a Beneficial Ownership Report

The term “beneficial owner” is defined under SEC rules, and is basically any person who directly or indirectly shares voting power or the power to sell the security.  For example, this would include individuals who are the majority member of an LLC and the Trustee of a Trust.

Schedule 13D Must Be Filed By Shareholders of Greater Than 5%

When a person or group becomes the beneficial owner of greater than Five Percent (5%) of a voting class of an Issuer’s equity securities registered under Section 12 of the Securities Exchange Act of 1934, the beneficial owner is required to file a Schedule 13D with the SEC.

Under certain circumstances the shorter Schedule 13G may be used.  Shareholders owning more than 5% in non reporting companies such as voluntary filers and Pink Sheets are not required to file a Schedule 13D or Schedule 13G.

Who Has the Obligation to File a Schedule 13D?

It is important to note that the beneficial owner has the obligation to file a Schedule 13D, not the public company, since the nature of “beneficial ownership” might prevent the Issuer from knowing which individuals are behind all of its corporate entity shareholders, such as LLCs or Trusts.

Schedule 13D filings for most publicly traded companies are searchable in the SEC’s EDGAR database system.

Matt Stout, OTC securities attorney, works with shareholders to issue Rule 144 legal opinions and to assist with SEC filings, such as Schedule 13D and SEC Forms 3, 4, and 5.

Obligation to File Reports Under the Securities Exchange Act of 1934

Exchange Act Reporting Requirements

When a public company registers its securities under the Securities Act of 1933 (the “Securities Act”) through the filing of an S-1 Registration Statement, it must continue to file periodic reports with the SEC under the Securities Exchange Act of 1934 through at least the end of the fiscal year in which the S-1 becomes effective.

After the end of that fiscal year, the public company must continue reporting to the SEC unless its obligation to report is suspended.   The SEC will suspend an Issuer’s filing obligations if

  1. The number of shareholders falls below 300 for the class of securities offered; or
  2. The number of shareholder is below 500 for the class of securities offered and the Issuer had less than $10 million in total assets in each of the last 3 fiscal years.

An Issuer can request that the SEC suspend its filing obligations by filing a Form 15.   From there, Issuers usually choose to become a Pink Sheet and file under the Alternative Reporting Standard used by the OTC Markets Group.

There are two situations in which a public company would still have the obligation to file SEC Exchange Act reports, regardless of its preference for the alternative reporting standard:

  1. If the public company lists its securities on an exchange, like the New York Stock Exchange, the NYSE MKT or the NASDAQ; or
  2. If the Issuer has record shareholders greater than 2,000.