BUSINESS LAW

Private Equity

For virtually all entrepreneurs, the most efficient mechanism to procure equity financing under an SEC exemption is through the use of Regulation D (Reg D), which is a limited offer and sale of their company's stock, or securities, without registration under the Federal Securities Act of 1933. Complying with Reg D provides the company's officers and directors with an insurance policy regarding disclosure. R | R attorneys can create all of the following Reg D private placement memorandums:

Rule 504 of Reg D

Rule 504 is considered the optimal choice for entrepreneurs seeking less than $1 million. It is good for those who cannot afford many of the costs associated with the Securities & Exchange Commission (SEC) registration process.

Rule 506 of Reg D

Rule 506 of Reg D allows a company to raise an unlimited amount of capital, as long as the company satisfies the following standards for an exemption under this rule:

• The company can raise an unlimited amount of capital;
• The company does not use general solicitation or advertising to market the securities;
• The sale of the company's securities can be to an unlimited number of accredited investors and select few other purchasers. Unlike Rule 505 of Reg D, all non-accredited investors, either alone or with a purchaser representative, must be "sophisticated". This means that they must have "sufficient" knowledge and "experience" in financial and business matters to make them capable of evaluating the merits and risks of the prospective investment;
• The company, i.e. the seller of the securities, must be available to answer questions by prospective purchasers;
• Financial statement requirements as for Rule 505; and
• Purchasers receive restricted securities, which may not be freely traded in the secondary market after the offering.

To discuss your particular private equity needs, call us at 443-413-5228 to schedule a time to meet with our attorneys.