What is a Form CB filing? Cross-border offers on EDGAR

A Form CB filing is how a cross-border deal reaches EDGAR without becoming a US deal. When a foreign company runs a tender offer, exchange offer, business combination or rights offering, and Americans hold only a small slice of the target, the SEC lets the offeror send in the home-country offer document rather than comply with the full US regime. The Form CB filing is the wrapper for that document. This page explains who files one, when, and what it means for a US holder. It is not investment advice.

Who files a Form CB, and under which rule?

Form CB is codified twice, at 17 CFR 239.800 under the Securities Act and at 17 CFR 249.480 under the Exchange Act, because it serves both registration relief and tender offer relief. Four rules route to it:

• Rule 801 (17 CFR 230.801), a rights offering by a foreign private issuer, exempt from Securities Act Section 5 registration.
• Rule 802 (17 CFR 230.802), an exchange offer or a business combination for the securities of a foreign private issuer, also exempt from Section 5.
• Rule 14d-1(c), the Tier I exemption for a third-party tender offer for a foreign private issuer's securities.
• Rule 13e-4(h)(8), the Tier I exemption for an issuer tender offer, meaning a foreign company bidding for its own shares.

In each case the offeror or issuer furnishes the informational document it published at home, in English, on Form CB. If that party is a foreign company it must also file a Form F-X at the same time, under 17 CFR 239.42, appointing an agent for service of process in the United States. That same Form F-X is the one used by Canadian and other foreign issuers filing on Form F-8, F-10, F-80 or Form 40-F.

The 10 percent test that makes it available

The whole structure turns on one measurement: how much of the subject class US holders own.

• Under Rule 801, US holders must hold no more than 10 percent of the outstanding class subject to the rights offering, determined under the US holder definition in Rule 800(h).
• Under Rule 802, US holders must hold no more than 10 percent of the securities that are the subject of the exchange offer or business combination. Where a successor registrant will issue the securities, the test is applied to the successor's class as if measured immediately after completion.
• Under Tier I in Rules 14d-1(c) and 13e-4(h)(8), US holders must not hold more than 10 percent of the class sought.

There is a workable fallback when the ownership analysis cannot be done. Under the instructions to Rules 13e-4 and 14d-1, US holders are presumed to hold 10 percent or less, or 40 percent or less for Tier II, so long as there is a primary trading market outside the United States, unless average daily US trading volume over a recent twelve-month period exceeds the relevant percentage of worldwide volume, or a home-jurisdiction annual report indicates higher US ownership, or the filer otherwise knows or has reason to know that it is higher.

What a Form CB actually contains

Form CB is a cover. The substance is the home-country document attached to it, whether that is a scheme circular, an offer document or a rights offering letter. Three conditions shape what a US holder sees:

Equal treatment. The offeror must let US holders participate on terms at least as favourable as those offered any other holder of the subject securities. There are carve-outs: the offer need not extend to states or jurisdictions requiring registration or qualification, though the same cash alternative must then be offered, and a cash-only alternative may be given to US holders where the offeror has a reasonable basis for believing the cash is substantially equivalent in value.

Dissemination. Any informational document, including amendments, must be given to US holders in English on a comparable basis to holders in the foreign issuer's home jurisdiction. Where the offeror publishes rather than mails at home, it must publish in the United States in a way reasonably calculated to inform US holders.

A required legend. The offer document must carry a prominent statement, or its plain-language equivalent, saying that the offer is made for the securities of a foreign company, that it is subject to disclosure requirements of a different country, that any financial statements may be prepared under non-comparable accounting standards, and that enforcing US securities law rights against a foreign issuer and its officers may be difficult.

Rule 801 adds one restriction of its own: the terms of the rights must prohibit transfers of the rights by US holders except in accordance with Regulation S.

Tier I and Tier II are not the same relief

Both tiers sit in the same rules, and the difference is large.

Tier I, at 10 percent US ownership, exempts a third-party tender offer from Section 14(d)(1) through 14(d)(7), Regulation 14D, Schedule TO, Schedule 14D-9, and Rules 14e-1 and 14e-2. That is close to a full substitution of the home regime, and Form CB is the reporting channel.

Tier II, at up to 40 percent US ownership under Rules 14d-1(d) and 13e-4(i), is not a substitution. The offer complies with US tender offer rules except for specifically listed items, such as permitting separate US and foreign offers, or accepting home-jurisdiction notice of extensions. A Tier II bidder for a US-registered class generally still files a Schedule TO. The two documents are compared in Form CB vs Schedule TO.

Why a Form CB is worth watching

For anyone tracking ownership changes, a Form CB filing is often the only EDGAR trace of a control transaction happening entirely offshore. It shows the target, the offeror, the structure and the date, and it attaches the real offer document. What it does not give is the US-style disclosure package: no Schedule TO item responses, no Schedule 14D-9 reply from the target board, and financial statements prepared under another country's standards. For a US-registered foreign issuer, compare the periodic route in what is a 20-F filing.

It is also worth knowing that Form CB is furnished rather than filed in the ordinary registration sense. The rules were adopted in 1999 and amended in the SEC's 2008 cross-border release, and they were built to keep US holders inside foreign offers instead of being excluded from them.

A Form CB filing is a dated primary document that points at a bigger one, which is exactly how to use it. Flock reads EDGAR filings and stamps every figure with its source and date. What any of it means for your money is your call to make.