Effects of Loss of WKSI Status on Automatic Shelf Registration Statements

Client Advisory

February 4, 2009

A “well known seasoned issuer” (a “WKSI”) may file an automatic shelf registration statement with the Securities and Exchange Commission (“SEC”) on Form S‑3ASR to register an unspecified amount of equity or debt securities.  There are two significant advantages of using an automatic shelf registration statement, as opposed to a regular non‑WSKI Form S‑3 shelf registration statement. First, as the name indicates, a Form S‑3ASR registration statement becomes effective automatically upon filing, without review by the SEC. Accordingly, after filing a Form S‑3ASR with a “universal” prospectus, an issuer can, promptly thereafter, file a prospectus supplement indicating the amount, and describing the features, of the securities that it wishes to “take off the shelf”, and then commence to sell those securities immediately upon the filing the prospectus supplement. Second, as a WKSI, the issuer is not required to register a specified dollar amount of securities at the time of filing the Form S‑3ASR; and it may postpone the payment of the filing fee until the time of filing the prospectus supplement for each shelf take-down (called “pay as you go”).

Many WKSIs have taken advantage of this procedure since its adoption under the Securities Reform Act in December 2005. However, in light of the recent turmoil in the capital markets, many issuers have lost their WKSI status and questions have arisen as to how the loss of WKSI status would affect an issuer’s ability to sell securities under a previously filed automatic shelf registration statement.

What is a WKSI?

Under Rule 405 under the Securities Act of 1933 (the “1933 Act”), a WKSI is defined as an issuer that:

  1. meets all of the registrant eligibility requirements of Form S‑3 (principally meaning that the issuer has a class of equity securities registered under the Securities Exchange Act of 1934 (the “1934 Act”), or otherwise is required to file periodic reports under the 1934 Act, and has timely filed all required 1934 Act reports during the preceding 12 months); and
  2. as of a “determination date” had a worldwide market value of its outstanding voting and non-voting common equity held by non‑affiliates of $700 million or more (or satisfies one or more alternative size tests).

The “determination date” may be any date within 60 days before the filing of (1) the shelf registration statement; (2) the issuer’s most recent post‑effective amendment to a previously filed shelf registration statement; or (3) its most recent Annual Report on Form 10‑K (in the event the issuer has not filed a shelf registration statement or a post-effective amendment for 16 months).

The definition of “determination date” in connection with the determination whether a company has WKSI status for Form S-3ASR purposes has two important ramifications. First, the issuer does not need to have a $700 million market cap at the time of filing the Form S-3ASR. It is sufficient if the issuer had a $700 million market cap at any time within the 60 day period prior to filing. Second, since a Form 10-K annual report is deemed an amendment under Section 10(a)(3) of the 1933 Act, the issuer must also have a $700 million market cap at some point within the 60 day period prior to filing its subsequent Form 10-K.

On January 29, 2009, the staff of the SEC issued a “Compliance and Disclosure Interpretations” which answers a number of questions regarding the effects of the loss of WKSI status on previously filed automatic shelf registration statements.

If an issuer has lost WKSI status and takes no further action, until when may it continue to sell securities under its previously filed Form S‑3 ASR?

After the loss of WKSI status, an issuer may continue to sell securities registered under a previously filed automatic shelf registration statement until the date on which its Form 10‑K for 2008 is required to be filed.

What must an issuer that loses its WKSI status do to be able to continue to sell securities under its previously filed Form S‑3 ASR after filing its Annual Report on Form 10-K?

If an issuer fails to qualify as a WKSI within the 60‑day period preceding the filing of its Form 10‑K for 2008, in order to be able to continue to sell securities under a previously filed Form S‑3 ASR, the issuer is required to amend its automatic shelf registration statement by converting it to the 1933 Act registration form it is then eligible to use (presumably, Form S‑3). This would usually be accomplished by filing a post‑effective amendment on Form S‑3 to convert the automatic shelf registration statement (Form S‑3 ASR) to a non‑automatic shelf registration statement. This post‑effective amendment is subject to SEC review and will not automatically become effective; rather, it must be declared effective by the SEC. During the period starting with the filing of the issuer’s Form 10‑K for 2008 and continuing through the effectiveness of the post‑effective amendment on Form S‑3, no sales can be made under the issuer’s previously filed automatic shelf registration statement.

Are there steps which an issuer can take to be able to sell securities without interruption under its previously filed Form S‑3 ASR?

Prior to filing its Form 10‑K for 2008, an issuer may file a post‑effective amendment to its previously filed automatic shelf registration statement registering a specific amount and type of securities. As a non-WKSI filer, the issuer will not be allowed to use the “pay as you go” procedure, requiring it to pay the associated filing fee at that time.

Promptly after filing its Form 10‑K for 2008, the issuer must file either (i) a second post‑effective amendment, or (ii) a new Form S‑3 registration statement.  The issuer may continue to offer and sell securities under the previously filed automatic shelf registration statement until the second post‑effective amendment, or the new Form S‑3, is declared effective.

If, for instance, an issuer has in place a “dribble out” common share sales program, the above‑described process would avoid a possible interruption of that sales program. One caveat is that if the SEC staff decides to review the second post‑effective amendment (or the newly‑filed Form S‑3), or, more likely, the issuer’s Form 10‑K (which is incorporated by reference in the registration statement), it may be prudent for the issuer to suspend its “dribble out” sales until that review has been completed, even if, as a legal matter, it has the right to continue those sales.

Questions regarding this advisory should be addressed to Peter Flägel (212-238-8649,, Steve Glusband (212-238-8605,, Vincent Monte-Sano (212-238-8808, or Sharon Rosen (212-238-8690, 

Carter Ledyard & Milburn LLP uses Client Advisories to inform clients and other interested parties of noteworthy issues, decisions and legislation which may affect them or their businesses. A Client Advisory does not constitute legal advice or an opinion. This document was not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any transaction or matter addressed herein. © 2020 Carter Ledyard & Milburn LLP.
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