When raising capital, a company must comply with securities laws. As previously discussed, all offerings of securities, must either be registered with the SEC or exempt from such registration. Rule 506(b) is the most commonly used securities exemption for private companies. Even after complying with the basics of this exemption, there are many nuanced requirements that, if missed, can jeopardize qualifying under the exemption. Failure to comply with Rule 506(b) can subject an issuer and its officers and directors to various penalties. The SEC and state regulators can institute investigations and administrative and civil actions, enter various orders, and impose significant monetary penalties, and can transmit evidence to the U.S. Attorney General, who can bring criminal proceedings. In addition, violating securities registration requirements entitles the purchasers to rescission rights under federal and state laws. This blog post compiles some of the best practices for conducting a 506(b) offering in a bullet-pointed list for easy reference.
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The JOBS Act, a Year Later – Part 1: Introduction
It’s been almost a year since Congress passed the Jumpstart Our Business Startups Act (or JOBS Act). At the time, the passage of this bill was greeted with significant enthusiasm from the start-up community. Among other things, it provided for a crowdfunding exemption from securities registration requirements and a repeal of the prohibition on general solicitation of investors in connection with certain private offerings. A year later, how do things stand? In this first of a series of posts, I’ll explore how implementation of the JOBS Act has progressed and what we might expect in the future. [Read more…]
U.S. House Votes to Adopt Six Measures Loosening Securities Regulation for Smaller Companies; Provisions Include Crowdfunding and “IPO On Ramp”
The U.S. House of Representatives voted earlier today (March 8, 2012) to pass the Jumpstart Our Business Startups (JOBS) Act. The bill is actually a compilation of six separate measures that have been proposed in Congress (and in some instances already passed in the House) which loosen securities restrictions on smaller companies. Here are brief summaries of each measure: [Read more…]
Working Effectively with Your Lawyer: Don’t “Recycle” Legal Work
Recycling is generally considered a good thing when it comes to trash. It helps the environment and conserves resources. However, in the context of legal work, it is not such a good thing. Of course, when I use the word “recycle,” I don’t mean recycling the paper that the legal documents are on. I’m talking about recycling the actual words on the page. When a client “recycles” their lawyer’s work which was performed on a previous deal and uses it in a new deal, the client is asking for trouble. [Read more…]
What does the future hold for crowdfunding legislation?
Previous, I summarized the Entrepreneur Access to Capital Act (H.R. 2930), a bill which provides for a crowdfunding exemption to the registration requirements of federal and state securities laws. The bill was recently passed by the U.S. House of Representatives, and now awaits U.S. Senate action. In this post, I’ll provide some of my thoughts on what is to come. [Read more…]