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    Exempt Offerings
    Exempt Offerings
    Exempt Offerings
    Ebook76 pages38 minutes

    Exempt Offerings

    By Private Placement Handbook Series

    ()

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    About this ebook

    Start-ups and other companies can now use general solicitations to fund private placements -- for the first time in 80 years. The new Rule 506 may prove to be the answer to the prayers of some start-ups frustrated with existing fund sourcing platforms. Observe:
    • The amount that can be raised is unlimited
    • There is no requirement for review of the offering under any Blue Sky laws (state securities regulations)
    • There is no review of the offering by the SEC
    • Solicitations can be online or offline
    • Solicitations can be made to anyone

    Sales (as opposed to solicitations, which can be made to the world) must still be to accredited investors, and issuers must get a third-party to verify that each investor is in fact accredited.

    Companies will continue to need to use professional private placement memorandum and related offering documents. They also will have to rely on appropriate non-disclosure agreements to keep details of their business plans confidential.

    LanguageEnglish
    PublisherPrivate Placement Handbook Series
    Release dateSep 13, 2015
    ISBN9781311883957
    Exempt Offerings
    Author

    Private Placement Handbook Series

    After getting a JD from Stanford Law School, a MA from the University of Chicago, a diploma from the University College London, and working as a reporter for The Wall Street Journal, Doug was a member of the California bar for 40 years, during which time he founded a series of law reporting services now owned by Thomson-Reuters. Doug specializes in debt and equity crowdfunding. He helps small business identify and solicit sources of private equity. Doug monitors a LinkedIn discussion group, State Securities Regulation, with 1500 members. Connect with Douglas Slain: LinkedIn: http://linkedin.com/in/douglasslain Facebook: http://facebook.com/douglas.slain Twitter: https://twitter.com/exemptofferings Blog: http://www.privateplacementadvisors.com/apps/blog Web site: http://privateplacementadvisors.com

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      Book preview

      Exempt Offerings - Private Placement Handbook Series

      Chapter One: First things first

      When doing an equity or debt raise for an early stage business, you need to:

      Reduce to writing an executive summary, business plan, and financial projection

      Determine the structure for the proposed offering

      Incorporate or form a limited liability company or other entity

      Prepare a private placement memorandum, investor questionnaire and subscription agreement

      File exemption documents with regulators

      Identify and present to investors

      Prepare term sheet(s)

      Execute appropriate investor documents

      Find the money

      Chapter Two: Rule 506 and General Solicitation

      Start-ups and other companies can now use general solicitations to fund private placements -- for the first time in 80 years. The new Rule 506 may prove to be the answer to the prayers of some start-ups frustrated with existing fund sourcing platforms.

      Observe:

      • The amount that can be raised is unlimited

      • There is no requirement for review of the offering under any Blue Sky laws (state securities regulations)

      • There is no review of the offering by the SEC

      • Solicitations can be online or offline

      • Solicitations can be made to anyone

      Sales (as opposed to solicitations) must be to accredited investors, and issuers must be able to verify that any actual investor is in fact accredited. Also, proposed rules will require issuers to send the SEC all marketing copy; as of September 23, 2013, however, there is no need to send copies of solicitation materials to the SEC (or to state regulators).

      Companies will continue to need to use private placement memorandum and related offering documents. They also will have to rely on an appropriate non- disclosure agreements to keep details of their business plans confidential.

      Investment funds now will have access to a much wider pool of potential investors than before, subject to separate rules and regulations promulgated by their own regulators.

      Chapter Three: What is a Private Placement?

      What is a private placement or private offering? They are fund raises that have not been registered with the SEC. When doing either an equity or debt raise for an early stage business, you need to:

      Reduce to writing an executive summary, business plan, and financial projections

      Determine the structure for the proposed offering

      Form a limited liability company or other entity

      Prepare a private placement memorandum, investor questionnaire and subscription agreement

      File exemption documents with the necessary regulators

      Identify and present your business to investors

      Prepare term sheets

      Verify to the SEC that money is only coming from accredited investors (see Verification Letter below)

      Execute investor documents and receive funding

      Offering Documents

      Once you have prepared an executive summary, a business plan and financial projections, you need offering documents.

      I. Private Placement Memorandum

      A private placement memorandum is a document that discloses all relevant and material information that a reasonable investor would want to know before deciding whether or not to engage in a proposed transaction.

      A PPM is different from a prospectus. The term prospectus is used when referring to an offering document for registered securities whereas the term private placement memorandum is used in reference to securities that are exempt from registration under Regulation D.

      Checklist of what can be in a PPM:

        Securities Legends

        Suitability Standards for Investors

        Summary of the Securities Offering

        Risk Factors

        Capitalization of the Company

        Use of Proceeds from the Securities Offering

        Dilution

        Plan of Distribution of the Securities

        Selected Financial Data

        Analysis of Financial Condition and Results of Operation

        Business of the Company

        Management and Compensation

        Certain Transactions (transactions between the Company and its shareholders, officers, directors or affiliates)

        Principal Shareholders

        Terms of the Securities Offered

        Description of Capital Stock of the Company

        Tax Matters

        Legal Matters

        Experts

        Documents Available for Inspection

        Financial Statements

        Projections

        Exhibits

      II. Investor Questionnaire is crucial for private

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