News

Private Placement Memorandum And Regulation D

Private Placement Memorandum And Regulation D: The §4(2), or private-offering, exemption is the basis on which most emerging business enterprises are able to sell securities in the United States. (The term refers to that section in the ’33 Act that contains the exemption.) Because of a series of fundamental miscues when the legislation was first drafted, the ’33 Act reads backwards.

Instead of postulating a definition of exempt private offerings, or defining the offerings which must be registered, the Act suggests that all sales of securities are to be registered and then exempts various transactions, including ones "not including any public offering" of securities. Since by far the great bulk of transactions are of the exempt variety, the tail is wagging the dog. Were the language to be interpreted literally, a crime wave could break out in this country as unsuspecting small businessmen, raising a few dollars from friends and relatives for the classic corner fruit stand, wind up invoking the civil (and, theoretically at least), criminal sanctions for violations of §5 of the ’33 Act.

Full Story: http://vcexperts.com/vce/library/encyclopedia/documents_view.asp?document_id=89&referrer=buzz

*************

Drafting The Business Plan And Private Placement Memo

Since a private placement memorandum, usually abbreviated as the PPM, is the norm in most deals, the founder should familiarize himself with the standards for memorandum preparation, keeping in mind that, like any legal document, there are various audiences. The audience composed of potential plaintiffs (and, theoretically at least, the SEC enforcement staff) will read the document against the requirements contained in the cases imposing liability. The audience composed of investors will read the document for its substantive content: "What are the terms of the deal?" To professional investors interested enough to become potential buyers, the private placement memorandum is a handy collection of only some of the information they are interested in, plus a lot of surplus verbiage (the empty language about suitability standards, for example).

To the issuer, it is a sales document, putting the best face possible on the company and its prospects. To the managers, the memorandum is a summary of the business plan. Indeed, it may incorporate the business plan as an exhibit or be "wrapped around" the plan itself—a memorialization of how the business is to be conducted.

Full Story: http://vcexperts.com/vce/library/encyclopedia/documents_view.asp?document_id=60&referrer=buzz

News Catrgory Sponspor:


Dorsey & Whitney - An International business law firm, applying a business perspective to clients' needs in Missoula, Montana and beyond.

Leave a Comment

You must be logged in to post a comment.