Mich. Admin. Code R. 451.3.3 - Small corporate offering registration, SCOR

Rule 3.3.

(1) This rule offers issuers an optional method of registration pursuant to the provisions of section 304 of the act, MCL 451.2304, for corporations or manager-managed limited liability companies issuing securities that are exempt from registration under the federal exemption, regulation D, 17 C.F.R. § 230.504, or pursuant to the provisions of section 3(a)(11) of the securities act of 1933, 15 U.S.C. § 77c(a)(11). Issuers eligible for this method of registration shall use Form U-7 as the disclosure document for the offering. This method of registration is known as SCOR, as defined in R 451.1.1(z).

(2) Both of the following provisions apply to SCOR applications:

(a) Applications must be in compliance with the provisions of this rule; however, the provisions of this rule may be modified or waived by the administrator.

(b) Where individual characteristics of specific offerings warrant modification from the provisions of this rule, they must be accommodated, insofar as possible, while still being consistent with the intent of this rule.

(3) All of the following provisions apply to the availability of SCOR:

(a) SCOR is intended to allow small corporations or manger-managed limited liability companies to conduct limited offerings of securities. SCOR uses a simplified offering format designed to provide adequate disclosure to investors concerning the issuer, the securities offered, and the offering itself. Certain issuers may not be able to make adequate disclosure using the SCOR format and shall, therefore, be unable to utilize SCOR. SCOR shall not be utilized by the following issuers and programs unless written permission is obtained from the administrator based upon a showing that adequate disclosure can be made to investors using the SCOR format:

(i) Holding companies, companies that have a principal purpose of owning stock in, or supervising the management of, other companies.

(ii) Portfolio companies, such as real estate investment trusts.

(iii) Issuers with complex capital structures.

(iv) Commodity pools.

(v) Equipment leasing programs.

(vi) Real estate programs.

(b) SCOR is available only to the issuer of the securities and not to any affiliate of that issuer or to any other person for resale of the issuer's securities. In addition, all of the following requirements must be met:

(i) The issuer is a corporation or manager-managed limited liability company that is organized under the laws of the United States or Canada, or any state, province, or territory or possession thereof, or the District of Columbia.

(ii) The issuer does not engage in petroleum exploration or production or mining or other extractive industries.

(iii) The offering is not a blind pool or other offering for which the specific business to be engaged in or property to be acquired by the issuer cannot be specified.

(iv) The offering price for common stock or common ownership interests, collectively referred to as "common stock"; the exercise price if the securities offered are options, warrants, or rights for common stock; and the conversion price if the securities are convertible into common stock is equal to or more than $5.00 per share.

(v) The aggregate offering price of the securities offered, within or outside this state, is not more than $5,000,000.00, less the aggregate offering price of all securities sold within the 12 months before the start of and during the offering of the securities under federal exemption, regulation D, 17 C.F.R. § 230.504, in reliance on any exemption pursuant to the provisions of section 3(a)(11) and (b) of the securities act of 1933, 15 U.S.C. § 77c(a)(11) and (b) or in violation of section 5(a) of the securities act of 1933, 15 U.S.C. § 77e(a).

(c) SCOR is not available to investment companies that are subject to the investment company act of 1940, 15 U.S.C. § 80(a) et seq., or to issuers that are subject to the reporting requirements of section 13 or section 15(d) of the securities exchange act of 1934, 15 U.S.C. § 78m and § 78o(d).

(d) SCOR is available for registration of debt offerings only if the issuer can demonstrate a reasonable ability to service its debt.

(4) SCOR is not available for the securities of any issuer if any of the following provisions applies to that issuer or any of its officers, directors, 10% stockholders, unitholders, promoters, or any selling agents of the securities to be offered or any officer, director, or partner of such selling agent:

(a) The individual has filed a registration statement that is the subject of a current registration stop order entered pursuant to any federal or state securities law within 5 years before the filing of the SCOR application.

(b) The individual has been convicted, within 5 years before the filing of the SCOR application, of any felony or misdemeanor in connection with the offer, purchase, or sale of any security or any felony involving fraud or deceit, including any of the following:

(i) Forgery.

(ii) Embezzlement.

(iii) Obtaining money under false pretenses.

(iv) Larceny.

(v) Conspiracy to defraud.

(c) The individual is currently subject to any state administrative enforcement order or judgment entered by any state securities administrator or the SEC within 5 years before the filing of the SCOR application or is subject to any federal or state administrative enforcement order or judgment in which fraud or deceit, including making untrue statements of material facts or omitting to state material facts, was found and the order or judgment was entered within 5 years before the filing of the SCOR registration application.

(d) The individual is subject to any federal or state administrative enforcement order or judgment that prohibits, denies, or revokes the use of any exemption for registration in connection with the offer, purchase, or sale of securities.

(e) The individual is currently subject to any order, judgment, or decree of any court of competent jurisdiction temporarily or preliminarily, or permanently restraining or enjoining such party from engaging in or continuing any conduct or practice in connection with the purchase or sale of any security or involving the making of any false filing with any state or with the SEC entered within 5 years before the filing of the SCOR application. However, the prohibition of this subdivision and subdivisions (a), (b), and (c) of this subrule do not apply if the person who is subject to the disqualification is duly licensed or registered to conduct securities-related business in the state in which the administrative order or judgment was entered against the person or if the broker-dealer who employs the person is licensed or registered in this state and the form BD that is filed in this state discloses the order, conviction, judgment, or decree relating to the person. A person who is disqualified pursuant to the provisions of this subdivision shall not act in any capacity other than that for which the person is licensed or registered. Any disqualification pursuant to the provisions of this subdivision is automatically waived if the state securities administrator or other state or federal agency that created the basis for disqualification determines, upon a showing of good cause, that it is not necessary under the circumstances that the exemption be denied.

(5) By filing for SCOR in this state, the registrant agrees with the administrator that the registrant shall not split its common stock or declare a stock dividend for 2 years after the effectiveness of the registration without the prior written approval of the administrator.

(6) In addition to filing a properly completed form and filing fee required pursuant to the provisions of section 305(2) of the act, MCL 451.2305(2), an applicant for SCOR shall file all of the following exhibits with the administrator:

(a) The form of selling agency agreement.

(b) The issuer's articles of incorporation or other charter documents and all amendments to those documents.

(c) The issuer's bylaws or operating agreement, as amended to date.

(d) Copies of any resolutions by directors setting forth terms and provisions of capital stock or units to be issued.

(e) Any indenture, form of note, or other contractual provision containing terms of notes or other debt or of options, warrants, or rights to be offered.

(f) A specimen of the security to be offered, including any legend restricting resale.

(g) Consent to service of process accompanied by an appropriate corporate resolution.

(h) Copies of all advertising or other material that is directed, or to be furnished, to investors in the offering.

(i) The form of escrow agreement for escrow of proceeds.

(j) Consent to inclusion in disclosure document of accountant's report.

(k) Consent to inclusion in disclosure document of tax advisor's opinion or description of tax consequences.

(l) Consent to inclusion in disclosure document of any evaluation of litigation or administrative action by counsel.

(m) The form of any subscription agreement for the purchase of securities in the offering.

(n) An opinion of an attorney who is licensed to practice in a state or territory of the United States that the securities to be sold in the offering have been duly authorized and, when issued upon payment of the offering price, shall be legally and validly issued, fully paid and nonassessable, and binding on the issuer pursuant to their terms.

(o) A schedule of residential street addresses of officers, directors, and principal stockholders.

(p) Additional information as the administrator requires by rule or order.

Notes

Mich. Admin. Code R. 451.3.3

2019 MR 1, Eff. 7/3/2019