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Today’s post highlights the federal securities law exemption for intrastate securities offerings made pursuant to rule 3(a)(11) and rules 147 and 147a.

As we’ve discussed previously, the Securities and Exchange Commission (SEC) is the governmental body responsible for the regulation and enforcement of federal securities laws that govern both interstate securities offerings and intrastate securities offerings. These laws are detailed in, among others, the Securities Exchange Act of 1933. The SEC is primarily concerned with regulating securities transactions that take place on a large scale (generally interstate), and so the ‘33 Act provides for an exemption from registration for intrastate securities offerings. Today’s post discusses the federal exemption for intrastate securities offerings under Rule 3(a)(11).

For purposes of this post, when we refer to “selling securities” we’re generally referring to companies raising investments under either equity or debt instruments. Here’s a prior post…

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Safe harbor; securities

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Is raising money from non accredited investors worth the costs and risks? We take a look at the options for the friends and family financing round.

Is the family and friends round worth the costs and risks? After discussing the pros and cons with us, entrepreneurs often decide against raising money from family and friends. In today’s post we’ll talk about six different ways you could raise money from family and friends. …

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Friends and family round

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Today’s blog post will discuss different kinds of startup investor and explore other ways startups find the financial support they need to be successful.

While not all startups have to raise money to scale, most startups will need some investor money to grow. When it’s time to fundraise, there are many potential sources of funding for your startup. Today’s blog post will discuss different kinds of startup investor and explore other ways startups find the financial support they need to be successful.

What is an Angel Investor?

Angel investors are usually individuals, or groups of individuals, who invest their own money into early stage companies. “Seed funding” from angel investors is usually one of the first sources of financing a startup company will pursue (generally after raising initial funds from the founders and their friends and family). This seed funding is generally used to support the…

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Seed funding

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In this post we discuss a bill in Congress (HALOS Act) that would make it easier for startups to raise funds at pitch events.

Presentations made at startup demo days on college campuses and at accelerator pitch events routinely mention the details of a company’s effort to raise capital through the private sale of securities. This practice, however, raises concerns over whether these presentations amount to a ‘general solicitation’ for a company’s securities under Regulation D of the Securities Act. The definition of a general solicitation could include any advertisement, article, or other communication, including any meeting where the attendees were invited by a general advertisement that present the opportunity to participate in a company’s securities offering. If an early stage company makes a general solicitation, then it may be precluded from using certain valuable exemptions from registering their security offering with the SEC.

Companies…

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Space Needle Halo

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Today's post discusses the concept of securities offering "integration" or "integrated transactions" in securities law and startup law.

When companies raise money from investors, the transaction will be governed by securities laws. These securities laws have complex requirements that often “trip up” companies unfamiliar with the rules and their application. In today’s post, we tackle one of those areas of securities and startup law where companies often trip up: integration.

What is “Integration” in the context of a securities offering?

To better understand integration, you’ll need to first understand what a “securities offering” is. In very simple terms, a securities offering is a transaction where a company is offering to sell a security in exchange for (in most cases) cash. You can check out a discussion of the more precise definition of a security in our prior post.

Integration is a term in…

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Securities regulations

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Today’s post dives specifically into the definition of “accredited investor” as defined in Rule 501 of Regulation D of the Securities Act of 1933

The definition of accredited investor is a topic we’ve touched on briefly in several posts throughout the years, but today’s post dives specifically into the definition of “accredited investor” as defined in Rule 501 of Regulation D of the Securities Act of 1933. We’ll also point out why it’s important for you to understand who is considered an accredited investor.

Definition under Rule 501

The SEC states that the definition of accredited investor is “intended to encompass those persons whose financial sophistication and ability to sustain the risk of loss of investment or ability to fend for themselves render the protections of the Securities Act’s registration process unnecessary.” The definition of accredited investor under Rule 501 includes several types of individuals and…

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Accredited Investors

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Issuing employee equity in a startup, or any business, is a great way to compensate and incentivize employees.

Issuing equity to employees in a startup, or any business, is a great way to compensate and incentivize employees. However, employers and employees are often confused about the various types of equity compensation available and the pros and cons of each type of employee equity. In this series of blog posts on employee equity, we will continue our discussion of employee equity compensation plans by detailing the various types of equity that employers can grant and lay out the reasons for choosing one over the other.

When someone receives “equity” in a company, this means that they are receiving stock or future rights to stock in the company. By owning stock in a company, that person will then become a shareholder,…

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Employee Equity

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This post discusses Section 4(a)(7) of the Securities Act of 1933 and its impact in potentially making the resale of private stock easier.

Congress recently passed a new securities law exemption (Section 4(a)(7) of the Securities Act of 1933) that eases the limitations and restrictions surrounding the resale of private stock.  Prior to the new law, there were several regulatory hurdles that made the resale of private stock in a company difficult. As we’ve highlighted in prior posts, securities regulations require any sale of stock to be registered with the SEC (a time-consuming, expensive process), unless the sale is “exempt”—which means that the sale falls within one of the exemptions provided for in the securities regulations. (Check out one of our prior posts on securities exemptions and Rule 144 for more background on the regulations specifically surrounding selling stock in private companies as they applied…

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New Law Reduces Hurdles to Resale of Private Stock

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This post discusses five key securities-related issues for merger and acquisition transactions.

In business acquisitions, and especially in business acquisitions structured as stock purchases, there are a number of securities issues you’ll want to be on the lookout for. For the purposes of this post, you can think of a security as the stock or other equity interest in a company like an option or warrant. (You can check out this post for a more detailed discussion of what a security is.) Below I’ve listed 5 key securities-related due diligence issues for you to consider when purchasing a business.

We’ll start with the two key issues that are important for acquisitions of both stock and assets; we’ll finish with three key issues that primarily affect stock acquisitions:

Issues for acquisitions of either stock or assets

Two issues are of…

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M&A Securities Issues