Preparing for an A+ grade: Regulation A and “material contracts”

We’ve discussed previously the fact that in a Regulation A offering the SEC gets to see all your stuff. Of course, it’s not just the SEC who gets to see stuff, but anyone with an internet connection. And some of the stuff that they get to see in a Regulation A filing consists of your “material contracts.” What are these? Well, they are described here, but basically they consist of contracts with management, such as employment agreements, stock option plans and important agreements such as supply or manufacturing contracts.

What if you have confidential information in those contracts that you don’t want to share with the public? Or the contract has a confidentiality clause? The only way to redact (black out) information in a document that’s required to be filed with the SEC is to submit a “confidential treatment request” or “CTR”. There’s an established process for CTRs.  You have to show harm if the information were to become public. Just being subject to a confidentiality clause isn’t enough. The SEC only lets you leave out very specific information; “the formula for Coke” is one oft-cited example. CTR requests take ages and are expensive.

So before you even start to test the waters for a Reg A offering, discuss this with your lawyers: are you able and willing to show all your material contracts to the world?

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