Legal Question in Securities Law in California
Securities Offer: Regulation A Question
Can a company trading on the Pink
Sheets be the primary owner (or
founder/organizer/main principal) of the
stock in a company that is offering
shares pursuant to a Regulation A
Offering?
1 Answer from Attorneys
Re: Securities Offer: Regulation A Question
Well, in broad, general terms, a reporting company can have a subsidiary that is also a reporting company under the securities laws, and I can think of no reason why the parent couldn't achieve public status by route X (an S-1, S-18 or whatever) and then take the affiliate public via a Reg. A offering.
However, the consequences of making any mis-step or misrepresentation along the route are so dire that I recommend being certain that counsel for both the issuing entity (the Reg. A registrant) and the promoting Pink Sheets company independently verify that there is no SEC or state blue-sky problem and that all aspects of the companies' relationship, past, present and future as a result of the proposed issuance, are fully and timely disclosed by each company.
Also, bear in mind that related issuances of securities can sometimes be treated as a single issue for purposes of determining whether (for example) caps on dollar amount available under a registration form or an exemption from registration are exceeded.
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