Reconfirmation in Reg CF, what triggers it and how it works

Reconfirmation is triggered by a material change to a live Reg CF offering. When one happens, every investor with an open commitment must be told about it and must actively reconfirm within five business days of receiving the notice. An investor who does nothing is cancelled and refunded (17 CFR 227.304(c)). Silence counts as a no, which is why a single amendment can cost a campaign real money.

We covered where updates belong and when a change needs a filing in campaign updates and material changes. This post goes deeper on the one mechanism that most often surprises issuers: what sets reconfirmation off, and exactly what happens over the following two weeks.

What triggers reconfirmation?

The trigger is a material change to the offering terms or to the information the issuer has disclosed. Rule 304(c) does not define "material." The standard comes from securities law generally: a fact is material if there is a substantial likelihood that a reasonable investor would consider it important in deciding whether to invest. The Supreme Court set that test in TSC Industries v. Northway (1976), and it is the test counsel will apply.

A material change also means the issuer must amend its offering statement on a Form C/A (17 CFR 227.203(a)(2)). So in practice, the amendment and the reconfirmation travel together. File one, expect the other.

Changes that usually trigger it

These are the changes we see most often in live raises. Each is commonly treated as material, though counsel makes the call on your facts.

• The deal terms. The price per share, the valuation or valuation cap, the discount, or the type of security.
• The offering's size or timing. The target amount, the maximum, or the deadline. Extending the deadline is the most common one, and it catches teams off guard because it feels administrative.
• The people. A founder or executive leaving, a new officer or director, or a change in control.
• The money. A meaningful change to the use of proceeds, or new financial results that differ from what the Form C showed.
• The risks. A lawsuit, a regulatory action, losing a major customer or supplier, or another new risk the risk factors do not cover.
• The facts already filed. Discovering that something in the Form C was wrong. A correction can be material even when the true fact is minor, because investors relied on the false one.

Good news can be material too. A contract that doubles revenue changes the picture just as much as one that halves it.

Changes that usually do not

Routine progress that the Form C already anticipates, like shipping a product on the disclosed schedule, posting the progress updates the rules require, or fixing a typo, is generally not material. Neither is ordinary news about the business that does not change the investment picture. When you are unsure, ask counsel before you post the update, because an update that reveals a material fact before the amendment creates a disclosure problem of its own.

How the reconfirmation process works, step by step

Here is the sequence under Rule 304(c), with the work each step puts on the issuer and the funding portal.

1. The issuer files a Form C/A. It describes the change. The portal updates the offering page so new investors see the new information.
2. The portal notifies every investor with an open commitment. The notice says a material change has happened and that the commitment will be cancelled unless the investor reconfirms within five business days of receiving it (227.304(c)(1)).
3. Investors have five business days to reconfirm. The clock runs from when each investor receives the notice, counted in business days, so a notice sent on a Thursday runs into the following week. Reconfirming is an affirmative act, usually a click in the portal.
4. Silent investors are cancelled. Within five business days after the window closes, the portal must tell each investor who did not reconfirm that the commitment was cancelled, why, and how much is being refunded, and direct the refund from Escrow.
5. New commitments keep coming in. The offering stays open. Investors who commit after the amendment saw the new information, so they do not need to reconfirm.

From filing to a settled number, budget about two weeks: up to five business days of reconfirmation, then up to five more for cancellations and refunds.

What if the change happens near the deadline?

If a material change occurs within five business days of the offering's deadline, the offering must be extended to give investors the full five business days to reconfirm (227.304(c)(2)). This overrides the usual rule that commitments are locked in the last 48 hours before the deadline (227.304(a)). A material change reopens every open commitment, including those inside that final window.

What about money already closed?

Reconfirmation applies to investment commitments, meaning money still in escrow. Investors whose money was released in an earlier rolling close already hold their securities, so there is no commitment for them to reconfirm. That is one practical reason to close on what you can before making a planned change. Ask counsel and your portal how they handle a change between closes on your offering.

Why reconfirmation is expensive

The rule is built as opt-in. A commitment survives only if the investor acts. Some investors will not open the email. Some will open it on a phone and forget. Some will use the moment to reconsider an investment they were lukewarm about. None of those people object to the change, and all of them are cancelled.

So the cost of a material change is not the news. It is the attrition from asking hundreds or thousands of people to do something within a week. A late deadline extension can shed committed dollars even though nothing about the company got worse.

How to plan for it

Decide the likely changes before you file the original Form C. A deadline long enough for the raise you are actually running, and a target you are confident about, remove the two most common triggers. The 21-day minimum before money moves is explained in the Reg CF 21-day rule.

Batch changes. If two changes are coming, file them in one amendment. Two amendments mean two reconfirmation rounds.

Change early, not late. Ten investors reconfirming in week two is easy. A thousand in the last week is not, and a change in the final five business days forces an extension.

Treat reconfirmation as a campaign. Write a plain-language explanation of the change before the amendment is filed. Ask the portal what channels it uses for the notice and whether you can follow up in its update channel. Send reminders on day two and day four. Track the reconfirmed total daily against the open total.

Plan the cash. Commitments that might be cancelled are not money you can count on until the window closes. Do not schedule a close or a spend against them until the reconfirmation round settles.

This is general information, not legal advice. Whether a particular change is material, and how your portal runs reconfirmation, are questions for your securities counsel and your intermediary.

FAQ

What triggers reconfirmation in a Reg CF offering?

A material change to the offering or to the disclosed information: a fact a reasonable investor would consider important to the decision to invest. Common examples are changes to the price, valuation, target, deadline, use of proceeds, leadership, or a significant new risk.

How long do investors have to reconfirm?

Five business days from receiving the notice. Investors who do not reconfirm in that time are cancelled, and the portal must notify them and direct their refund within five more business days.

What happens if an investor ignores the reconfirmation notice?

The commitment is cancelled and the money is returned from escrow. Reconfirmation is opt-in, so doing nothing counts as cancelling.

Does extending the deadline require reconfirmation?

A deadline extension is commonly treated as a material change, which means a Form C/A and reconfirmation from open commitments. Confirm the treatment with your counsel and portal before extending.

Can a material change happen in the last 48 hours?

Yes. If it occurs within five business days of the deadline, the offering is extended so investors get the full five business days to reconfirm, and commitments that were locked inside the final 48 hours are reopened.

Do investors who commit after the amendment need to reconfirm?

No. They committed with the new information in front of them. Reconfirmation is only for commitments made before the change.