Blank Check Company

An Exchange Act reporting company wants to conduct a small capital raise and considers using Rule 504 because of its simpler conditions. Is Rule 504 available to a company that is already an Exchange Act reporting company?

1. A.Yes, Rule 504 is available to any issuer regardless of its Exchange Act reporting status, since the rule's conditions focus solely on the dollar amount raised.Wrong. This ignores Rule 504's categorical issuer-type exclusions.
2. B.No, but only because Exchange Act reporting companies are required to use Rule 506 exclusively for any exempt offering, making Rule 504 legally unavailable to them for that separate reason.Wrong. There is no such rule requiring reporting companies to exclusively use Rule 506.
3. C.No -- reporting companies, investment companies, and blank check companies are all categorically excluded from Rule 504 eligibility.Correct. This eligibility restriction is specific to Rule 504.
4. D.Yes, provided the reporting company's most recent annual report discloses that it intends to rely on Rule 504 for a future offering.Wrong. No such disclosure-based workaround opens Rule 504 eligibility to an excluded issuer type.

Why: No. Rule 504 is not available to issuers that are already subject to Exchange Act reporting requirements, along with investment companies and blank check companies, all of which are categorically excluded from Rule 504 eligibility regardless of how small the proposed offering is. This eligibility restriction does not apply the same way to Rule 506, which reporting companies can and do use.

Which of the following issuers is categorically ineligible to use Regulation A, regardless of how small its proposed offering would be?

1. A.A five-year-old private manufacturing company with a specific, identified business plan and audited financial statements, seeking to raise $10,000,000.Wrong. This describes a typical, eligible Regulation A candidate.
2. B.A private real estate development company with an identified project, seeking to raise $30,000,000 under Tier 2.Wrong. This also describes an eligible issuer, well within Tier 2's ceiling.
3. C.A blank check company with no specific identified business plan for a merger or acquisition.Correct. Blank check companies are categorically excluded from Regulation A eligibility.
4. D.A private technology company that has never previously raised outside capital, seeking to raise $5,000,000 under Tier 1.Wrong. This also describes a typical eligible issuer; prior fundraising history is not itself an eligibility criterion.

Why: A blank check company with no specific business plan, or one that has indicated its business plan is to engage in a merger or acquisition with an unidentified company, is specifically excluded from Regulation A eligibility, along with investment companies registered or required to be registered under the Investment Company Act, regardless of the size of the offering being contemplated.