Form C-TR question on timing of filing.

Assume CF issuer has less than $10M in assets and filed its first Form C-AR after the offering.  At that time the issuer did had not engaged a registered transfer agent and had more than 300 holders of record of the CF securities at the time of the first filing.  

If issuer subsequently engages a registered transfer agent to reduce the holders of record of the CF securities to less than 300, is this an event that triggers the 5 business day filing period for Form C-TR?  Or must the issuer file a new Form C-AR for this year and then use that at the 5 business day trigger date (assuming that the transfer agent is in place)?

CF says: "An issuer eligible to terminate its obligation to file annual reports with the Commission pursuant to § 227.202(b) must file with the Commission, within five business days from the date on which the issuer becomes eligible to terminate its reporting obligation,"

I think that as soon as you no longer have 300 holders of record that the issuer becomes eligible to terminate its reporting obligation but cannot find a lot of clarity on this point.

1 Answer, 1 Reply
Sara Hanks
Sara Hanks  replied:

Answering a question with a question: how would engaging a transfer agent reduce the number of holders of record?

David Duccini
David Duccini  replied:

This is a HUGE source of MISINFORMATION by the larger portals and some of them are outright LYING to issuers about setting up an SPV.  We talk to issuers every week who THINK they have "one line on their cap table" and that somehow magically the Transfer Agent is going to vote for the crowd.

Or worse, they claim that the "lead investor" is going to -- even though they are not actually obtaining proxy consents from investors and cannot force you to do so.

Oh, and there are varying "minority shareholder" rights in various states under Blue Sky laws.

Mark Roderick wrote a good article on this very topic, aptly titled:

"Using a Transfer Agent Doesn’t Mean You Have a Single Entry on Your Cap Table"