The very first step that most companies take when seeking private capital is the creation of a business plan. While business plans are an important facet of raising capital they are not designed to be investment documents. Raising capital requires very specific documentation that far surpasses what a business plan provides.
Under the Securities Act of 1933, any offer to sell securities must either be registered with the SEC or meet an exemption. Using Regulation D (or Reg D), the most commonly used exemption, companies must provide sufficient information to investors to avoid violating the antifraud provisions of the securities laws; under Rule 506(b), companies must give non-accredited investors disclosure documents that are generally the same as those used in registered offerings.
The information companies must provide investors is contained in three documents, the PPM, Subscription Agreement and Investor Questionnaire.
The Private Placement Memorandum, or “PPM,” is the document that discloses all pertinent information to investors about the company, proposed company operations, the transaction structure (whether you are selling equity or issuing debt), the terms of the investment (share price, note amounts, maturity dates, etc.), risks the investors may face, and more. Do not confuse the detailed disclosures and transaction structure in a PPM with a business plan provides – they are not the same
The Investor Questionnaire (“Suitability Questionnaire”) helps you identify and market to accredited investors. The multiple securities laws delineate and define accredited investors while placing limits on the number of non-accredited investors who may participate in your offering.
The Subscription Agreement sets forth the terms and conditions of the investment and is the “sales contract” for purchasing the securities: investors are not going to invest in your company or opportunity based on a handshake. In debt offerings you need to have a Promissory Note outlining the terms of the loan arrangement with the investors. The note is the actual “loan document” between the company and the investor.
We offer SEC, Reg D compliant Templates including the PPM, Subscription Agreement and Investor (Suitability) Questionnaire. Our Templates are based upon the Registration Statement (Form S-1), are prepared following the guidelines of Regulation S-K and are valid in all 50 states and Puerto Rico. Our Templates include all the basic legal disclaimers, NASAA jurisdictional legends, specific rule information and section by section data. We have Reg D, Rules 504, 505, 506(b) and 506(c) Templates for Equity and Debt offerings for corporations, LLCs, hedge funds and real estate funds.
Plus, when you purchase a set of offering documents from us, we’ll prepare and file your Form D with the SEC for FREE.