Securities Offerings

Securities Offerings

When your business needs to raise money, you want the most favorable terms and to complete the transaction as efficiently as possible. You may be looking to buy another company, expand into new markets, or improve your operations. Depending on your needs and goals, several funding options may be available. Many businesses sell shares in their company. However, under federal and state laws, a business cannot offer investors shares in the company unless the offering is registered – known as a public offering – or it falls under an exemption under Regulation D, a form of private offering. A private offering is not the equivalent of an unregistered offering, which is illegal under securities laws. Each type of offering has its benefits and drawbacks; deciding which one is best for your business is complicated. Our securities lawyers help small private and public companies make well-informed decisions about how to effectively finance their businesses and implement strategies to grow.

Registered Public Offerings

To reach the broadest group of investors, a registered public offering may be the best choice. A public offering also means complying with rigid securities regulations. In a registered offering, the Securities and Exchange Commission (“SEC”) requires a company to file a registration statement that includes information about the offering and the financial condition of the company.

The documentation is not only for the SEC; the documentation is essential to courting investors. An investor will not purchase your shares if that investor does not understand your business, what your business is worth, and how and when they will get a return on their investment.

Regulation D Offering

Private funding may be preferable in many cases because such an offering avoids onerous registration filing requirements. While it may be faster and less costly to the company, there are still certain, important requirements. Private offerings are allowed under Regulation D for companies seeking investors that fall within specified exemptions. Regulation D offerings are also known as private placements and are typically used by smaller companies.

While private offerings avoid the most time-consuming SEC filings, companies must file Form D and submit certain information including a securities purchase agreement, investor questionnaire, anti-money laundering questionnaire, and other documents.

A significant drawback of a Regulation D offering is that it may be sold only to “accredited investors” and cannot be advertised publicly.

Regulation S Offering

If a company wants to raise capital by offering or selling securities outside the United States, a Regulation S offering can help the issuer remain compliant with U.S. securities laws. Regulation S is a safe harbor provision that exempts international securities from having to register under Section 5 of the Securities Act of 1933. To qualify, the offer or sale must be made in an offshore transaction and there can be no directed selling efforts made by the issuer or any person acting on their behalf. An “offshore transaction” is defined as one not made to a U.S. person and the buyer is located outside the country. Investors in the U.S. do not qualify. 

U.S. and foreign companies can use Regulation S. However, Regulation S is not available to open-end investment companies, unit investment trusts registered or required to be registered under the Investment Company Act of 1940, and closed-ended investment companies required to be registered under the 1940 Act.

How We Help

No one size fits all solution exists to financing a business. Our goal is to help clients find and implement the optimal form of funding for their unique needs. We evaluate an array of factors, including corporate, securities, and tax laws; the company’s goals; the amount needed and its purpose; what investor terms the company will accept; and whether it is seeking domestic or foreign investors; among other issues. We work closely with the company’s C-Suite executives, accountants, in-house legal and finance teams, and auditors to develop and put a plan into practice for financing the business. The result is a bespoke solution that enables companies to efficiently obtain the resources they need to grow and to do so in compliance with the law.

If your company is seeking to offer securities, contact us for a consultation.