Private Shelf Agreement: What You Need to Know

A private shelf agreement is a legal arrangement that allows a company to issue and sell its securities in an expedited manner. A shelf registration statement is filed with the Securities and Exchange Commission (SEC) and the company can then sell securities from the shelf over a two-year period.

This type of agreement helps companies save time and money by avoiding the need to file separate registration statements each time they want to sell securities. It also provides flexibility in terms of the timing of the offerings and allows the company to react quickly to market conditions.

Private shelf agreements are typically used by large companies with established market positions and a track record of successful securities offerings. The agreements are often used for debt securities, but can also be used for equity securities, such as common stock or preferred stock.

A private shelf agreement is not without risks, however. The securities offered under a shelf registration statement must be registered with the SEC and the company must make certain disclosures about its financial position and business operations. Failure to provide accurate and complete disclosures can result in legal liability for the company and its officers.

It`s important for companies to have experienced legal counsel when entering into a private shelf agreement. The legal team can help ensure that all the necessary disclosures are made, that the registration statement is properly filed with the SEC, and that the company complies with all applicable securities laws and regulations.

In conclusion, a private shelf agreement can be a useful tool for companies looking to raise capital quickly and efficiently. However, it`s important to understand the risks involved and to have experienced legal counsel to help navigate the complexities of securities law.