Private Placements 101

"Regulation D" is a United States Federal program that allows companies to raise capital by selling equity or debt securities (stock shares issued private or public). "Regulation D" was introduced in 1982; thus it was formed under the provisions of Securities Act of 1933.

Raiseing capital can only be done under 3 regulation D "Rules" and specifically they allow for different types of investors, amounts of capital and methods of conducting an offering. When it comes to determining the PPM template that you need, you have to read all the provisions and comprehend, which rule is best and most effective for your particular offering. The three regulation D exeptions are as follows:

regulation D rule 504 (up to $1 million)
regulation D rule 505 (up to $5 million)
regulation D rule 506 (any amount)

The Regulation D programs were specially designed to offer a exeption to sell securities for a private capital raise without having to register the securities (any stock share transaction that involve the investors). Another main focus of this program is providing the most appropriate documentation for accurately accepting and using the capital.

Registering the securities and to filing reports with the SEC are not necessities for companies that use the Reg D exemption, but they are legally bound to file a form known as "Form D" after their first securities transaction. "Form D" is a notice which contains full details of the names and addresses of company's stock promoters, as well as its owners, and last, it includes some other brief information associated with the particular company.

State form filing is a must, in addition to filing Form D, and it is known as "Blue Sky" Filings. Also, most of the states necessitate a particular form that is required to be filed together with a copy of the PPM and SEC "Form D". Also, each state charges a fee that ranges from $50 to $495, and in most states, until the capital has been received from an investor in a specific state, filing the form is not essential. When a company receives the capital, normally the company has 15 days to submit the appropriate documentation.

If a private or public company is in the process of raising capital through accredited investors, it ought to have a securities offering (PPM) in position. The fact is, only a securities offering provides the compulsory state and federal requirements to safeguard the investment capital from legal contraventions.

Even if a company's capital raise involves only one or two investors, the company is still responsible for providing the proper investment agreements and disclosures required by law. Also, the procedure of raising capital from investors (equity or debt of any amount) needs a specific language, and a business plan is not adequate. However, it is very important that a particular company, which is seeking capital from investors, have a Private Placement Memorandum, a Promissory Note (or a Subscription Agreement) along with the federal and state filing forms. Raising capital without even one of these documents is highly discouraged.