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Insights and information for online capital formation

 
June 07, 2015 by Sara Hanks
By this point everyone knows that the financial statements you must provide to the SEC in Tier 2 Regulation A offerings must be audited by a CPA. We are seeing reputable CPAs offer their services at very reasonable prices for early-stage companies. But companies need to know exactly what is covered in their agreement with the CPAs. Does your contract with the CPA include responding to SEC comments on financial statements? The SEC review process involves both lawyers and accountants commenting on your filings, and you have to respond to those comments to the SEC's satisfaction. You may also have to restate your financial statements, ie change them and get a new...
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June 04, 2015 by Sara Hanks
Just over two weeks to go to revised Regulation A going into effect (setting aside the litigation) and time for another blog post. This time I'm looking at what an Offering Circular (the prospectus-like document that makes the offer of securities) is going to look like. You're going to be disappointed. It's going to be dull. I would say "very dull" but the SEC sometimes has a problem with adjectives. I know that the online alternative investment market that relies on Rule 506 of Regulation D under the Securities Act has been experimenting with many different types of disclosure. Videos! Pitch decks! PPMs with pictures of attractive people using the issuer's...
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May 29, 2015 by Sara Hanks
Three weeks to go to effectiveness of new Regulation A (we'll ignore the litigation for the moment), and time for a new topic: "testing the waters" (TTW). One of the great things about Reg A is the ability to find out, at low cost, whether it's worth hiring lawyers and accountants to prepare the filing with the SEC. You can use social media to find your crowd and ask them whether they want to invest, and in what amounts, and what kind of security they would be most interested in. But (and there's always a "but" in securities law, right?) there are some requirements you need to meet, both at the time you publish your TTW materials, and later. First, there is...
This entry is filed under Crowdfunding, Regulation A, Securities Law, Blog
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May 27, 2015 by Andrew Hanks
CrowdCheck, Inc. was named to Entreprenuer Magazine's "100 Brilliant Companies" for 2015 and joins nine other companies in the "From the Crowd" section.  100 Brilliant Companies to Watch: http://www.entrepreneur.com/article/245890 Brilliant 100 "From the Crowd" Edition:                     http://www.entrepreneur.com/article/245909 More crowd brilliance The iNaturalist app and website, maintained by the California Academy of Sciences, lets citizen “scientists” upload photos, notes or observations of wildlife populations. Beepi connects sellers and buyers of used cars (that pass inspection); if the car doesn’t sell in 30 days, the company will buy it.  Glow...
This entry is filed under In The News, Blog
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May 25, 2015 by Sara Hanks
...for "filing a federal lawsuit" that is. On the Friday before the long weekend, William Galvin of Massachusetts filed in the US Appeals Court for the District of Columbia asking for an injunction against Reg A+ going into effect on June 19. Watch this space for developments. Update [1 pm Tuesday] . . . Montana is also filing a suit, accordingly to comments made by Mr. Galvin. But we haven't found that filing yet. Update [1 pm Thursday] . . . The Montana suit (which is consolidated with the Massachussetts suit) threatens that they will seek a stay (asking the court to prevent Reg A going into effect). See if I ski in Big Sky ever again!
This entry is filed under Crowdfunding, Regulation A, Securities Law, Blog
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May 21, 2015 by Sara Hanks
Just over four weeks to go to effectiveness of new Regulation A, and time for another post on Reg A+ topics. This time I'd like to discuss Tier 1 financial statements. I've seen some chatter to the effect that while financial statements for Tier 2 offerings must be audited, Tier 1 financials must be reviewed by a CPA. Actually, not so. The SEC's rules just say "need not be audited." No review required. But don't start cheering yet. The absence of the audit requirement may make Tier 1 look like a more attractive option for companies raising a smaller amount of money and only intending to target investors in one state. But it's not going to be as easy as it...
This entry is filed under Crowdfunding, Regulation A, SEC, Blog
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May 15, 2015 by Sara Hanks
Five weeks to effectiveness of the changes to the SEC's Regulation A, popularly known as A+, and we are starting a series of blog posts about getting ready to use Regulation A. And the first topic is one we haven't seen very much chatter about: the need to file "material contracts" with the SEC as part of the filing of the Offering Statement. Here's the rule: a "material contract" is one that is made "other than in the ordinary course of business that is material to the issuer". Simply put, that means a contract that isn't run of the mill and that is important to your business. So it doesn't include your contract for internet service but it does include things...
This entry is filed under Crowdfunding, Regulation A, Securities Law, Blog
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May 08, 2015 by Sara Hanks
We blogged about Section 17(b) compliance some months ago. Since then some friends in the market have asked what we would recommend as best practices, and although, as always, this isn’t legal advice, here’s a useful starting point to develop your own best practices.
This entry is filed under Disclosure, SEC, Securities Law, Blog
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May 05, 2015 by Andrew Stephenson
Entrepreneurs and fund managers appreciate the flexibility that comes from organizing as a limited liability company ("LLC") or a limited partnership ("LP").  In contrast to C Corporations which have specific rules under the Delaware Corporations Code and similar state statutes, LLCs and LPs have the ability to write into their own operating agreements or partnership agreements their own rules regarding the governance of the entity, the duties of management, and rights of investors. However, when an LLC or LP sets its own rules, it is bound by them.  And not complying with its own rules can have disastrous consequences. Recently, the Delaware Chancery Court...
This entry is filed under Disclosure, Due Diligence, Securities Law, Blog
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April 01, 2015 by Andrew Stephenson
One of the most useful provisions of the Regulation A+ Rules issued by the SEC on May 25 is new Rule 255, "Solicitations of interest and other communications." This provision allows companies to "test the waters" and determine if there is any interest in its investment offering before it has filed anything with the SEC, prepared any offering materials, hired counsel, engaged an accountant, or even formed the company that will offer securities.  However, there is a catch.  Once a company has relied on the testing the waters provision under Rule 255 without having filed anything with the SEC or state regulators, it may only rely on Tier 2 of the new Regulation A...
This entry is filed under Crowdfunding, Regulation A, SEC, Securities Law, Blog
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