Regulation S

Regulation S (Reg S) is the SEC exemption from US securities registration for offers and sales made outside the United States to non-US persons. It is distinct from Regulation D (which covers domestic offerings to US accredited investors), allowing US companies to raise capital from international investors without registering the offering with the SEC under the Securities Act of 1933. It is the regulatory mechanism most commonly used when US startups raise from sovereign wealth funds, foreign family offices, foreign corporations, or other non-US investor types.

The two main "safe harbors" within Reg S:

• Category 1: securities of foreign issuers with no substantial US market interest. Most permissive but least relevant to typical US-incorporated startups.
• Category 2: securities of foreign issuers with substantial US market interest, or certain other situations. Specific compliance requirements during a "distribution compliance period" (40 days or 1 year depending on type).
• Category 3: securities of US issuers selling abroad. Most relevant for US startups raising from international investors. Requires offering restrictions, distribution compliance period (1 year for equity securities), and various other conditions.

The practical mechanics: US companies raising from international investors typically structure the offering as dual Reg D (for any US accredited investors) and Reg S (for international investors), with separate documentation reflecting the different regulatory bases. The investor representations differ: US investors represent accreditation status; international investors represent non-US status and compliance with their home jurisdiction's rules. The 2020s reality: as venture capital increasingly comes from international sources (Singapore GIC, Saudi PIF, Norway NBIM, Abu Dhabi Mubadala, etc.), Reg S compliance has become standard practice for most institutional venture rounds. The lawyers handle the mechanics; founders rarely need to know more than that international investors are coming in under Reg S.

Ryan's Take

Reg S is invisible infrastructure: your corporate lawyer files Reg D for the US investors and Reg S for the international ones, and it just works. Two things can break it. Don't market a Reg S offering to US investors, because that can blow the exemption. And make sure each investor's reps in the subscription agreement actually match their jurisdiction. Get competent counsel on the filing and you'll never think about this again, which is the point.

What founders get wrong: Treating international investors as if they sign the same documents as US investors. They typically don't; Reg S requires specific investor representations about non-US status, restrictions on resale during the distribution compliance period, and other conditions that domestic Reg D documents don't include. Use the right documentation for each investor's jurisdiction.

Related: [Regulation D] · [Accredited Investor] · [Qualified Purchaser]

FAQ

What is Regulation S? The SEC exemption from US securities registration requirements for offers and sales of securities made outside the United States to non-US persons. Distinct from Regulation D (which covers domestic offerings to US accredited investors). Allows US companies to raise from international investors without registering with the SEC.

When do startups use Reg S? When raising from international investors: sovereign wealth funds, foreign family offices, foreign corporations, or other non-US investor types. US startups typically structure dual Reg D / Reg S offerings: Reg D for US accredited investors, Reg S for international investors, with separate documentation reflecting the different regulatory bases.

What's the difference between Reg D and Reg S? Reg D: domestic exemption for US accredited investors. Reg S: international exemption for non-US persons outside the US. The two are often used together in the same financing round, with separate investor representations and compliance requirements for each jurisdiction.