Minnesota Franchise Regulatory Considerations – SCOR (Small Corporate Offering Registration)

Capital - Money

SCOR: Access to Capital for Small Businesses

Increased Access to Capital

A SCOR offering is a tool for small businesses to raise capital without the prohibitive costs involved in traditional stock offerings.

Regulatory Relief and Streamlining

Because the offering is registered solely with the state, multiple reporting requirements are eliminated. In addition, the enhanced form U-7 disclosure document is simply formatted into 50 detailed questions designed to satisfy the necessary disclosures without burdensome requirements.

Completing the Form U-7

The process of completing a SCOR offering is centered around the form U-7. The Form U-7 is less complex than traditional stock prospectuses. The Form U-7 consists of 50 detailed questions designed to provide the state and the investor with important information regarding the company’s operations. The questions in the U-7 form consist of items such as the company’s history; its business and properties; risk factors facing the company; use of the offering proceeds; description of the securities being offered; dividend history; key personnel; principal stockholders; and pending or threatened litigation.

Answering the Form U-7 questions adequately and completely will satisfy the required disclosures in law.

Once the Form U-7 is completed, it is submitted, along with reviewed or audited financial reports, and the required fee to the State of Minnesota Department of Commerce Registration Division. The Department reviews and provides comments on the documents. So long as no stop order is in effect and no proceeding is pending under Minnesota Statutes section 80A.13 a SCOR registration statement becomes effective automatically at 5:00 p.m. on the twentieth full business day after the filing of the registration statement, or the last amendment of it, or at some earlier time determined (by order) by the Commissioner of the Minnesota Department of Commerce.

For purposes of a nonissuer transaction, other than a transaction by an affiliate of the issuer, all outstanding securities of the same class identified in the small corporate offering registration statement as a security registered under Minnesota Statutes Chapter 80A are considered to be registered while the small corporate offering registration statement is effective. The registration statement is effective for one year after its effective date or for a longer period designated by an order of the Commissioner of Commerce. The registration statement may be withdrawn only with the approval of the Commissioner of Commerce.

An issuer can raise up to $1 million in a 12 month period, and offerings must sell for at least $1 per share.

CREDITS: This is an excerpt from A Guide to Starting a Business in Minnesota, provided by the Minnesota Department of Employment and Economic Development, Small Business Assistance Office, Twenty-eighth Edition, January 2010, written by Charles A. Schaffer, Madeline Harris, and Mark Simmer. Copies are available without charge from the Minnesota Department of Employment and Economic Development, Small Business Assistance Office.

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