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Golden Bull Capital's Private Placement Program
Private placements provide capital at a critical time in a company's growth. Private placement transactions are much more structurally flexible than public offerings, and offer a greater level of issuer confidentiality by avoiding SEC filings and public market scrutiny. Golden Bull Capital's works together with issuers to structure a marketable transaction, prepare an information memorandum, contact a qualified group of investors on a confidential basis, and negotiate an expedient closing on favorable terms. Golden Bull Capital's work team of private placement profesioanals, corporate finance specialists, industry research analysts, and lawyers, have lots of collective experiences, and works closely with clients from start to finish.
Private Placement is sale of company securities that do not involve a public offering and that are not required to be registered with the federal and state securities commissions. "Private Placement" refers to offerings that comply with the requirements of an exemption to the registration requirements of the securities laws. In most cases, the exemption calls for the preparation of an offering memorandum that describes the company and the risks associated with investing in it. Sometimes the exemption permits a sale of a limited number or securities to certain qualified investors without a formal offering memo.
Private Placement Memorandum
A private placement memorandum (PPM) is the document that discloses everything the investor needs to know to make an informed investment decision. The PPM is very important because it provides the investor with all of the prescribed data they will need to make an investment decision and includes the actual documentation to effect the investment transaction. PPM's are designed as a stand-alone document - meaning that there need not be other information presented to the investor for them to make an accurate investment decision. This includes: the offering structure, the share structure of the company, SEC disclosures about the shares being purchased, company information, information on company operations, risks involved with the investment, management information, use of proceeds, information on certain transactions that could affect the investor, and investor suitability data. Many companies will attach their business plans to the PPM as supporting documentation. This is an acceptable practice so long as the information in the business plan properly corresponds with the information in the PPM and that the investor is made aware that the business plan alone does not constitute an offer to sell securities - only the PPM can make that offer.
Regulation D
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Rule 506 of Regulation D
Rule 506 of Regulation D is considered a "safe harbor" for the private offering exemption of Section 4(2) of the Securities Act.
Companies using the Rule 506 exemption can raise an unlimited amount of money. A company can be assured it is within the Section 4(2) exemption by satisfying the following standards:
- The company cannot use general solicitation or advertising to market the securities;
- The company may sell its securities to an unlimited number of "accredited investors" and up to 35 other purchases. Unlike Rule 505, all non-accredited investors, either alone or with a purchaser representative, must be sophisticated what is, 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;
- Companies must decide what information to give to accredited investors, so long as it does not violate the antifraud prohibitions of the federal securities laws. But companies must give non-accredited investors disclosure documents that are generally the same as those used in registered offerings. If a company provides information to accredited investors, it must make this information available to non-accredited investors as well;
- The company must be available to answer questions by prospective purchasers;
- Financial statement requirements are the same as for Rule 505; and
- Purchasers receive "restricted" securities, meaning that the securities cannot be sold for at least a year without registering them.
While companies using the Rule 506 exemption do not have to register their securities and usually do not have to file reports with the SEC, they must file what is known as a "Form D" after they first sell their securities. Form D is a brief notice that includes the names and addresses of the company owners and stock promoters, but contains little other information about the company.
In February 2008, the SEC adopted amendments to Form D, requiring that electronic filing of Form D be phased in during the period September 15, 2008 to March 16, 2009. Although as amended, the electronic Form D requires much of the same information as the paper Form D, the amended Form D requires disclosure of the date of first sale in the offering. Previously, the closing date of an offering was used as the first date of sale. The Office of Small Business Policy has posted information on its web page about the filing requirement for the new Form D.
If you are thinking about investing in a Reg D company, you should access the EDGAR database to determine whether the company has filed Form D. If you need a copy of a Form D filed as a paper filing (which will include any Form D filed before September 15, 2008), you can request a copy using our online form. If the company has not filed a Form D, this should alert you that the company might not be in compliance with the federal securities laws
You should always check with your state securities regulator to see if it has more information about the company and the people behind it. Be sure to ask whether your state regulator has cleared the offering for sale in your state. You can get the address and telephone number for your state securities regulator by calling the North American Securities Administrators Association at (202) 737-0900 or by visiting its website.
For more information,
http://www.sec.gov/answers/rule506.htm |
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