Shelf Registration Statements Begin Expiring in December

Some shelf registration statements previously filed under the Securities Act of 1933 will begin to expire on December 1, 2008. Under rules adopted by the Securities and Exchange Commission in 2005, companies will need to refile some shelf registration statements at least every three years. All public companies should review their currently effective registration statements and consult legal counsel to determine whether this three-year sunset will affect them. This Advisory summarizes the shelf offerings of domestic companies that are subject to the three-year sunset and the action that these companies should take to ensure that capital markets access and ongoing offerings are not interrupted. This Advisory does not address the effect of the sunset on registration statements filed by foreign private issuers or investment companies.

What Companies Should Do Now

With the sunset or “expiration” of many current shelf registration statements scheduled to begin on December 1, 2008, companies should begin taking action to avoid potential timing problems that may affect ongoing offerings and capital markets access. The first planning step should be review of currently effective shelf registration statements to determine whether (and if so, when) any of these registration statements will be affected by the three-year sunset. If any will expire in the short- or medium-term future, the company should determine the specific dates on which these registration statements will expire. With these dates determined, the company can develop a workplan that reflects various timing factors that may affect filing and effectiveness of any new shelf registration statements that must be filed to replace those that will expire under the sunset, such as obtaining consents from the company’s independent accountants and updated information about selling security holders. Another timing factor to consider is potential delays due to SEC staff review of registration statements that are not automatically effective upon filing, especially if the volume of new registration statement filings increases as the November 30 deadline approaches.

Computing the Three-Year Sunset

For shelf registration statements that were effective before December 1, 2005, the SEC’s transitional interpretation provides that the three-year period began on December 1, 2005, without regard to how long the registration statement had been effective before that date. Therefore, any of these shelf registration statements that are subject to the three-year sunset will expire on December 1, 2008.

For shelf registration statements with effective dates on or after December 1, 2005, the three-year period begins on the initial effective date of the registration statement. Subsequently-filed post-effective amendments do not extend the three-year period.

Registration Statements Subject to the Three-Year Sunset

The three-year sunset only affects securities offered under certain types of registration statements. SEC Rule 415(a)(5) provides that the following securities “may be offered and sold only if not more than three years have elapsed since the initial effective date of the registration statement under which they are being offered and sold”:

Securities Registered on a Form S-3 Automatic Shelf Registration Statement. Any automatic shelf registration statement (SEC EDGAR form type S-3ASR) filed by a well-known seasoned issuer (also referred to as a WKSI), for any type of offering, is subject to the three-year sunset. These registration statements may cover securities offerings by the company (such as universal shelf registration statements), resales by selling security holders, and several other types of offerings that could have been registered on other types of registration statements. In particular, WKSIs that filed a “pay as you go” universal shelf registration statement, or any other automatic shelf registration statement, shortly after the securities offering reform rules became effective in December 2005 may need to begin planning to file a new registration statement.

Securities Offered on a Delayed or Continuous Basis by the Company. Registration statements registering any delayed or continuous shelf offering by the company under Rule 415(a)(1)(ix) or (x) are also subject to the three-year sunset.

This includes universal, equity and debt registration statements filed under Rule 415(a)(1)(x) that many companies rely on for rapid capital raising transactions through shelf takedowns. In order for companies to ensure that they will continue to be able to complete these offerings expeditiously, they will need to carefully monitor and plan for the expiration of these shelf registration statements. In particular, any company that is relying on one of these shelf registration statement that became effective before December 1, 2005 will need to plan to file a new shelf registration statement before December 1, 2008 in order to avoid potential interruptions in its ability to engage in shelf takedowns.

In addition, registration statements covering continuous offerings such as combined dividend reinvestment/direct stock purchase plans (or DRSPPs) that are open to new investors (i.e., purchasers who were not previously security holders of the company) will be subject to the three-year sunset. As noted below, registration statements registering continuous shelf offerings by the company under sections of Rule 415(a)(1) other than Rule 415(a)(1)(ix) are not subject to the three-year sunset. This includes registration statements relating to dividend reinvestment plans, employee benefit plans and the issuance of securities upon the exercise or conversion of outstanding securities.

Mortgage-Related Securities. Registration statements registering offerings of mortgage-related securities, including such securities as mortgage-backed debt and mortgage participation or pass through certificates, under Rule 415(a)(1)(vii) are also subject to the three-year sunset.

Registration Statements Not Subject to the Three-Year Sunset

The three-year sunset does not apply to registration statements other than those noted above. Commonly used shelf registration statements that are not subject to the three-year sunset include, among others:

Form S-8 Registration Statements. Registration statements on Form S-8 registering securities sold pursuant to an employee benefit plan.

Resale Registration Statements. Resale registration statements, other than automatic shelf registration statements, covering offerings by selling security holders.

Registration Statements for the Exercise or Conversion of Outstanding Securities. Registration statements, other than automatic shelf registration statements, registering the issuance of securities upon the exercise of outstanding options, warrants or rights or conversation of other outstanding securities.

Registration Statements for DRIPs. Registration statements, other than automatic shelf registration statements, registering securities sold exclusively to existing security holders pursuant to a dividend reinvestment plan. However, because SEC rules define “dividend reinvestment plan” to exclude any plan that offers securities to persons who are not existing security holders of the company (e.g., DRSPPs), registration statements covering DRSPPs are subject to the three-year sunset as noted above.

The principal effects on shelf registration statements of the three-year sunset imposed by Rule 415(a)(5) are summarized in the table at the end of this Alert.

Using “Expired” Registration Statements

Under certain circumstances, a company may continue to use a registration statement after the third anniversary of its original effective date. Rule 415(a)(5) provides two different scenarios for use of a registration statement after the three-year sunset. In both cases, the company must have filed a new registration statement covering the securities offered by the prior registration statement.

First, a company may continue to offer and sell securities covered by the prior registration statement for up to 180 days after the third anniversary of the effective date of the prior registration statement (or, if earlier, until the new registration statement becomes effective).

Second, in the case of a continuous offering of securities that began within three years of the initial effective date of the prior registration statement, the company may continue that offering until the effective date of the new registration statement if such offering is permitted under the new registration statement.

These two extensions for the use of shelf registrations statements after the third anniversary of effectiveness can provide valuable transitional relief where a company is unable to get a new registration statement declared effective before a similar registration statement expires. However, both of these extensions require that the company has filed a new registration statement covering the offering. In all cases, it is important for the company to be aware of upcoming expiration dates and to plan – and file new registration statements – accordingly, allowing sufficient time to incorporate scheduling for third parties such as the company’s independent accountants, selling security holders and other offering participants, as well as for the possibility of SEC staff review and other events that may delay effectiveness of the new registration statement.

 Summary of the Rule 415(a)(5) "Sunset" on Registration Statements