For Companies

Why Your Startup Needs a Transfer Agent

November 27, 2019 4 min read


Why Your Startup Needs a Transfer Agent

As a growing startup, one of the most important decisions you can make is investing in a transfer agent. Transfer agents save startups critical time and money to use for growth, rather than administrative processes.

Let’s explore what a transfer agent is, how they operate, and why they’re important for startups.

What Is a Transfer Agent?

An SEC-registered transfer agent is a liaison between a company, whether it’s public or private, and its shareholders. The transfer agent handles bookkeeping and communications between the company and its shareholders around important things like corporate voting.

Transfer agents also ensure that shareholders receive payments that meet their investment terms, including dividend payments, and interest payments. In the case that a private company chooses to go public via initial public offering (IPO), a transfer agent is usually in charge of keeping the records of the shares issued to the public.

Why Are Transfer Agents Important to Startups?

The type of recordkeeping and shareholder communications that transfer agents handle can be incredibly time-consuming for any company, especially one without experience and expertise in investor relations. 

Startup founders have very little free time, and outsourcing the painstaking duties of organizing shareholder information and properly distributing payments, reports, and other communication allows startup leaders to focus on key growth initiatives.

In the context of equity crowdfunding, transfer agents also serve an additional function. According to Section 12(g) of the Exchange Act, companies with over 2,000 accredited investors or 500 non-accredited investors are required to register under the Exchange Act and become a publicly reporting company. This means companies that have acquired a large number of shareholders may need to regularly file SEC reports, which can be expensive and time-consuming.

However, the two regulations of equity crowdfunding provide conditional exemptions, or exceptions, to Section 12(g). Regulation A+ (which allows companies to raise up to $50M in a 12-month period) states that companies can exclude the investors who hold shares sold under Regulation A+ as long as the company:

  1. Doesn’t have a “float”, the number of shares available for trading, of more than $75M (or if there is no float, then more than $50M in revenue)
  2. Makes the required filings under Regulation A+, which includes annual reports with audited financials, semi-annual reports with unaudited financials, and event reports that detail material changes to the rights of shareholders or to the business itself
  3. Uses a registered transfer agent

Under Regulation Crowdfunding, the regulation we use most often at StartEngine, which allows companies to raise up to $1.07M,  companies can also exclude the investors who hold shares sold under Regulation Crowdfunding as long as the company:

  1. Has less than $25M in assets
  2. Makes the required filings under Regulation Crowdfunding, which includes an annual financial report

These two regulations make it possible to have thousands of investors on your cap table without being a publicly-reporting company, provided the business meets the conditions above, which is great news for equity crowdfunding!


Engaging a transfer agent not only protects startups from the costly risks associated with mistakes in shareholder records, reporting, and distribution of dividends, but also allows startups to put their time and money toward maximizing growth instead of administrative hassles.

Companies seeking to raise money via equity crowdfunding can also hire a transfer agent so they can be exempt from the responsibility and costs of filing public reports while having thousands of investors on their cap table under Regulation A+ and Regulation Crowdfunding, as long as the company meets the conditions of each regulation listed above.

Luckily, companies that successfully raise capital on the StartEngine platform can subscribe to StartEngine’s SEC-registered transfer agent StartEngine Secure! In addition to raising capital on our platform, you can also turn to StartEngine to handle your investor relations and cap table management after your raise has closed.

StartEngine also plans to launch a secondary trading marketplace (currently pending regulatory approval) that will allow investors to trade shares in companies that raised capital via equity crowdfunding. StartEngine’s Transfer Agent, Secure,  will be a central part of that platform and facilitate trading.

To learn more about how StartEngine can support your business, from crowdfunding to investor management to trading, fill out our application to speak with our team!

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