Companies headquartered outside the US can list securities for sale on US exchanges with certain preconditions. One of these is filing a Form F-3 with the Securities and Exchange Commission (SEC). The form F-3 is intended to capture information for US investors about a foreign company that they would otherwise have access to if it were a domestic company, namely basic information about company finances and governance.
This stems from the SEC's commitment to investor transparency — making sure that investors have access to the information needed to make informed decisions regarding their portfolio.
SEC Form F-3 instructions are not very complex, but there are some criteria to keep in mind when preparing to file. Keep reading to learn the purpose of the SEC Form F-3, the Form F-3 filing process and important deadlines to remember.
Eligibility Criteria for Form F-3
While most foreign private issuers will need to file the F-3 before their securities can be listed on a US exchange, there are some Form F-3 exemptions to note. Let's look closer at the eligibility criteria and who is exempt from needing to complete this form.
Eligibility threshold: Companies are required to file the form F-3 when their public float is over $75 million and when they have been reporting to the SEC for at least one year. Companies that don't meet this threshold are exempt from filing.
There are some actions that prevent a company from filing an F-3, including:
- Missed dividend payments or sinking fund installments for preferred shares
- The company has defaulted on a loan or lease payment
- The company has yet to file its annual report with the SEC
If a company fails to meet the criteria outlined by the SEC, it can lose its ability to file the form F-3, even if it has previously filed this form. If this were to happen, the company would need to correct any issues or errors, show that it is now in compliance. The company may also be required to submit filings they may have missed.
Understanding Form F-3 Amendments and Updates
The information listed above reflects traditional eligibility requirements for the form F-3. Recently, however, the SEC introduced key amendments to Form F-3 that modify the eligibility requirements.
The new amendments allow a Foreign Private Issuer to use the F-3 process to sell shares on US markets even if they do not meet the thresholds stated above. Now, these companies can sell with a smaller public float, provided they satisfy the other eligibility conditions and that they sell no more than one-third of their primary float in a 12-month period.
Foreign private issuers are also required to have common shares listed on a national securities exchange, for instance, in their home country.
The SEC specifically prohibits shell companies from taking advantage of this process. This rule change is intended to allow more foreign-held companies to access US markets, while streamlining the requirements for doing so. This makes the investment landscape more flexible and efficient.
Step-by-Step Guide to Filing Form F-3
What steps are involved in an F-3 filing? Let's look at the Form F-3 filing process and deadlines to keep in mind.
- Ensure Form F-3 eligibility: The above section details which issuers are eligible to complete the F-3, including new rule changes that lower the threshold for filers. Review the rules fully to ensure the company is eligible.
- Consult with counsel: If this is the first time you will be filing the F-3, you may choose to consult with a securities lawyer, who can offer advice specific to your situation.
- Gather necessary documentation: Form F-3 asks questions about the entity registering the securities, the proper legal name, the English translation of the name and the anticipated date of sale. The form also has several boxes that may be checked if the securities to be offered meet certain conditions. You should confirm that the form F-3 document is completed, including check boxes, and gather the necessary documentation in advance of filing.
- Include revised financial statements, if required: Companies may refer to financial statements that the company previously filed with. If those statements are no longer current, you should plan to add a revised financial statement that is then incorporated into the F-3 by reference. Leave ample time and gather appropriate documentation.
- Complete, review and submit the form: SEC Form F-3 is a straightforward form that should be simple to prepare when all the necessary documents are in order. Complete the form then review it for accuracy before transmission.
What about the Form F-3 deadline?
There is no specific deadline associated with an F-3, unlike with a financial statement or annual report. The form must be filed prior to registering securities. Thus, a delay in filing could mean a delay in selling securities to investors. Once filed with the SEC, a company can then offer securities for as long as the F-3 on file is still valid.
Form F-3 Compliance and Legal Implications
By now, the Form F-3 filing process, eligibility and amendments make it clear who can file Form F-3, when and why.
Let's look for a minute at the legal implications of missing Form F-3 requirements. If a foreign private issuer missed a step or filed this form when they did not meet the eligibility, what would happen?
The SEC has leeway to impose penalties, including fines, when companies are deemed ineligible to file, or provide inaccurate or misleading information. A repeat offender could lose the ability to use the F-3.
The good news is many of these situations can be avoided by consulting with a securities lawyer ahead of time. An attorney with experience advising foreign companies on US markets can make sure the company is eligible, clear up any misconceptions and offer assistance in gathering supporting documentation and preparing to file.
Comparing Form F-3 With Form F-1
The SEC has many forms with similar-sounding names. Let's look at how Form F-3 differs from Form F-1.
Both the F-1 and F-3 forms are used by foreign private issuers. The F-1 is typically used for comprehensive securities that require the filer to disclose significant information about its operations and financial health. It asks for more detailed information than the F-3 and generally takes more time to complete.
The F-3 is a brief form that does not collect a lot of informationThe F-3 is generally used by foreign companies that have experience reporting to the SEC and maintaining a sizable public float, though recent amendments have somewhat changed this.
Companies should choose an F-1 registration when they are new to the US markets or when there is a complex securities situation. For example, a company might choose an F-1 for an IPO.
Companies should choose the F-3 when they meet the eligibility criteria and to take advantage of the more efficient process. Once an F-3 is filed, the company can register securities on the US exchanges for a 3-year period, assuming they maintain eligibility as discussed above.
Avoiding Common Mistakes in Form F-3 Filings
Common mistakes in the F-3 filing include not understanding eligibility requirements, not providing updated financial statements, not accurately describing the securities to be offered and failing to include a required supporting document.
Companies can decrease the likelihood of errors in filing by following a procedure and double-checking for accuracy before filing. Using software custom-built for SEC filings also helps to avoid mistakes.
As a leading provider of SEC filing software, DFIN is experienced at helping foreign private issuers prepare F-3 forms, financial statements and other requirements. DFIN's software makes the SEC filing process straightforward and efficient with built-in error checks, XBRL tagging, collaborative features and an intuitive interface. Discover why industry leaders trust DFIN with their financial reporting needs.
