PRIVATE PLACEMENT OFFERING SERVICES

Nearly any venture can sell its own equity and debt securities (shares, units, etc.) to investors as a means of raising capital, through a private placement offering. Though a complex, legal process, our firm and attorneys have significant multi-industry experience successfully generating and implementing them with our total services solution.

	(Click Buttons below for more Info)
	PRIVATE PLACEMENT MEMORANDUM
	LEGAL AND DEAL CONSULTING
	FULL SUITE OF PRIVATE OFFERING DOCS
	506C GENERAL SOLICITATION

Private Placement Memorandum

We draft and prepare the core document in nearly any private placement offering, the private placement memorandum (“PPM”). Far from a boilerplate document, it acts as a legal “bible”, designed to be the authoritative repository of any representations, claims, and caveats you as the issuer convey to investors. As a result, it is the very first layer of defense against potential allegations of securities fraud. Nearly any private placement offering or crowdfunding offering cannot go without one as a core best practice.

Our private placement memorandum services are geared to consistently produce high quality Regulation D and crowdfunding offering documents that satisfy the SEC’s stringent “Form 1A” specification. The Form 1A document standard drives fully registered offerings which are vetted and approved by the SEC and accordingly offers potential investors substantial detail and disclosure. By drafting our clients’ private placement memoranda to Form 1A standards, we strive to maximize clarity, efficacy, and liability insulation. Moreover, drafting PPM’s to this standard enhances the offering’s viability among investors, financial advisors, placement agents, as well as institutions. Finally, our services include taking our robust private placement memoranda and enhancing their presentation value with the highest level graphics and visual content.

Private Placment Law Firm

While a PPM is the heart of a private offering, there are many other considerations and decision points that require a skilled and experienced hand. In particular, the actual structure of the offering (as a small sample: debt versus equity, waterfall mechanics, pro formas, conversion mechanics, investor rights, etc.) is not something that should be randomly chosen. We provide comprehensive planning, strategy and consulting services in and around your offering to assure optimal structure. Moreover, with our experience we can quickly and modify aspects of the offering as each deal often evolves over a period of time and as individual investors request particular incentives and rewards for investment. A brief summary of those considerations are below, any of which can have drastic implications for the overall character of the private placement offering:

• Pre Offering Analysis and Consultation: Analyzing the venture prior to designing the offering structure so as to identify and offset major weaknesses in the venture itself that may undermine investment viability is a key step.

• Debt versus Equity: One of the primary concerns for any private placement offering is the actual “security” to be offered. Contrary to popular belief, one can sell debt security as well as equity (i.e., the difference between an investor actually owning pieces of the company, versus the investor owning an obligation to pay back a debt). Since this is a major strategy point careful consideration has to be given to the various pros and cons of both approaches, which can have far-reaching implications.

• Optimally Choosing from Various SEC Exemption Rules: There are various “flavors” of private placement offering exemptions that each have their own set of pros and cons (e.g., the total amount of the capital raise, the nature of the documents required for prospective investors, etc.). Properly navigating between them so as to optimize the options and minimize the requirements of the issuer is a key strategy point and requires careful planning.

• “Blue Sky” Filing Strategy and Implementation: All private placement offerings have a double government footprint–a state footprint based on the residence of each investor, as well as the federal footprint which applies across the board. As a result, private placement offerings generally require notification filings (i.e., forms that indicate the nature of the offering, the principals involved, etc.) to be made with these states as well as the federal government. Each state has its own set of requirements which can add complexity and costs. Properly navigating between them so as to optimize the options and minimize the requirements of the issuer is a key strategy point and requires careful planning.

• Share and Unit Classes and Rights: An issuer cannot simply sell “shares”, without considering what investor rights, duties, and obligations attach to each (information rights, management rights, payout preference, etc.). As a result, while pricing the shares or notes is also key, special care should also be given to the various classes the shares, notes, etc. can take since that will dictate many of these rights, duties, and obligations (e.g., common, preferred, or convertible preferred equity).

• Engineering the Capitalization Structure: Properly devising the company capitalization structure (how many shares makes sense given both current and future capitalization/growth needs, company valuation and share, etc.) requires careful planning. Using figures that do not factor in long term considerations can potentially harm the company’s growth and deter investment in the current offering.

• Min/Max Offering: In certain cases, an issuer may be required by statute to or may desire to set a minimum threshold of investment that must be met prior to releasing or being able to utilize the funds. This is a tricky consideration and must be planned with care, so as not to unduly hamper the offering with over onerous thresholds, while still satisfying investor and statutory requirements.

• Engineering Investor Returns and Waterfalls: At the heart of any offering is the actual model of return for an investor. Each offering is different in terms of incentives, industry norms, participants, and a variety of other factors that may affect these models. In addition, a venture or project may leverage a jigsaw puzzle of funding sources including private equity or debt and institutional sources that may also affect these model.

• Marketing Strategies: Any private placement offering should be generated with a robust understanding of the optimal strategy to market that offering based on a solid sensitivity to the investor audience. In addition, after the offering has been generated.
  • There are many other considerations and decision points that require experience
  • The structure of the offering (as a small sample: debt versus equity, waterfall mechanics, pro formas, conversion mechanics, investor rights, etc.)
  • We provide comprehensive planning, strategy and consulting services

Full Suite of Private Placement Offering Docs

One of our key differentiators is that our services do not end with the private placement memorandum, but encompass custom drafting of all documents required to effectuate the private placement offering. While other outfits focus on a single deliverable, as a legal matter, the PPM is only the disclosure document and cannot consummate the investment transaction. In short, it tells the “story” of the investment opportunity, but is not a contract.

Since your relationship with the investor does not end with receiving their monies, contracts the lay out the metes and bounds of investor rights versus management’s rights is mission critical. In fact, effective contracts that structure that relationship after the monies are invested is the difference between a dysfunctional venture and a successful one. At least two additional significant and complex legal documents are required in nearly any given offering that demand at least the same amount of legal insight and engineering as the PPM.

• For example an LLC Operating Agreement is a key private placement offering document (the contract between the LLC, management, and investors), which dictates management’s rights to manage the venture, control its books, enter into contracts, dispose of and exploit assets, etc. Failing to implement a well drafted operating agreement not only undermines the PPM’s legal insulation, but can create management crises, by allowing investors to behave like management and challenge management’s judgment. In the case of a corporation, a similarly structured shareholders’ agreement is equally critical.

• Secondly, a Subscription Agreement is not only necessary to actually transfer title to the units or shares to the investor, but contains crucial terms whereby the investor attests to his or her qualifications under the applicable private placement offering rule to actually invest (this is especially critical if you are relying 506(c) to generally advertise or solicit investors). Improperly drafting this document can lead to serious consequences.

506C General Solicitation

No venture should overlook the opportunity to advertise its private placement offering to investors, especially when the government has given us the key to do so. Under the 2012 JOBS Act, a new provision of the commonly employed Regulation D Rule 506 exemption permits general advertising of an offering to accredited investors. Hence the newly minted section 506(c) of Rule 506 is often referred to as the “general advertising” rule.

This new rule marks a tectonic shift in private offerings, essentially permitting an issuer to leverage the exposure of a public securities offering (and crowdfunding) without sacrificing the benefits of a Regulation D private placement offering (lower preparation and compliance costs, less onerous overall process, potentially unlimited capital threshold etc.). However, as with the various other technical issues inherent in any private placement offering, the general advertising rule is a legal compliance issue that demands seasoned attorney oversight.

Businesses seeking to raise capital under Rule 506(c) often are not familiar with the various structural and compliance issues with the rule nor the best means to market and promote their 506(c) offering. We assist our clients in navigating this combined legal and marketing challenge, with a comprehensive set of 506(c) private placement offering services. These services include the generation of all necessary 506(c) compliant documentation, such as PPMs, subscription documentation, term sheets, investor suitability questionnaires, bond or note agreements, state and federal securities filings, etc.