Syndication is the legal path to private equity funding, but it could lead to a breach of SEC rules if not done correctly. We offer a full package of agreements and disclosures, including a Private Placement Memorandum, Operating Agreement, Subscription Agreement to protect you and your investors.
There are several different paths to raising equity.
Regulation D. Regulation D allows businesses to raise capital and use public advertising. Usually, a private company would have to go through the SEC’s registration process and would be limited to only accredited investors. In 2013, after the JOBS Act, Rule 506 expanded from one exemption to two. This new exemption allows private companies to “generally solicit” (advertise) as long as they only accept investments from accredited investors in the end.
Regulation A+. Regulation A also shifted after the JOBS Act passed in 2012 to become more like an IPO in that businesses must be qualified with the SEC. But since that time, it has become more reasonable for businesses to take this exemption because of the increased cap on the dollar amount that can be raised. The new Regulation A+ offers two tiers, both of which now allow accredited and non-accredited investors:
Tier 1: raise up to $20 million per year
Tier 2: raise up to $50 million per year (investment amounts per investor in this tier are limited)
Crowdfunding. The JOBS Act also created a crowdfunding regulation (“Regulation CF”) that allows small companies to raise money online by selling securities. The total is capped at $1 million per year but may be raised from both accredited and non-accredited investors. The stipulation is that all crowdfunding investors must invest through a registered broker dealer or funding portal, and there are limits on what each investor may contribute.
Intrastate Offerings. In intrastate crowdfunding, businesses raise capital by selling securities only within their own state. This exemption may be of interest to the business raising capital because it does not restrict the size of the offering or the number of investors who may take part. The offering company must be doing business in the state in which it is selling securities, and all investors must provide a statement to attest that they live in the same state.
The attorneys at the Moschetti Law Group have been representing syndication companies, private equity, and real estate developers. We built our firm on a set of principles which puts our clients first by providing outstanding representation, aggressive negotiation, and world-class client service and communication.
Click here to set up a free, no-obligation strategy session to discuss your syndication goals right now.