Crowdcheck Blog
Insights and information for online capital formation
Regulation A is a public offering of securities. Even though it is not a full blown IPO, it still takes a substantial amount of time to prepare and to have a successful offering. At CrowdCheck, we have been approached by a handful of companies that are excited about Regulation A and want to start selling to investors in a month. That’s great we say. We then ask, have you engaged an accountant? No. Do you know what you want to offer investors? No. Have you converted from an LLC to a C Corporation? No.
You get the idea.
A typical timeline for a Regulation A offering requires about two months of lead time. During that time, your accountants and lawyers can work…
This entry is filed under Regulation A, SEC, Blog
CrowdCheck has put together its definitive summary of Regulation Crowdfunding as adopted by the SEC. The memo can be found here, http://bit.ly/1XE8c44
This entry is filed under Crowdfunding, SEC, Section 4(a)(6), Blog
Here at CrowdCheck, we have been worried about how state regulators would respond to the SEC's new testing the waters rules for Tier 2 Offerings under Regulation A. As we previously addressed on this blog, the new rules exempted testing the waters communications from federal securities registration requirements, but left some ambiguity with respect to the application of "state notice" filings (which are permitted even in Tier 2 offerings). After all, testing the waters communications are offers of securities. And when those communications are made through open, online forums —such as through an investment platform or social media — those are offers of…
This entry is filed under Regulation A, Securities Law, Blog
Short answer, no. Long answer, maybe, but only after you wait for an extended period of time to ensure that no state would consider your testing the waters campaign to be integrated with your current offering. Why is this important? At CrowdCheck, we have heard advice making the rounds that seems to forget that the states have retained their ability to regulate the registration of securities under Tier 1 offerings. And states do take their registration requirements seriously.
This post includes a survey of the filing requirements to communicate in a Tier 1 offering for all 50 states plus the District of Columbia and Puerto Rico. This post will not discuss the…
This entry is filed under Regulation A, SEC, Securities Law, Blog
Don't fool yourself. While an offering under Regulation A+ is not an IPO on a stock exchange or full registration under the Securities Act, it is a big deal. Your company is preparing for a public offering of securities and will be taking on investors with whom you do not have any previous relationship. Those investors may have different ideas about the future of your company than you do and may demonstrate those ideas in the form of a lawsuit. That said, if Regulation A+ is still right for your company, you can help to protect, or maybe mitigate or reduce that risk.
The place to start is insurance. There are a variety of insurance products out there to…
This entry is filed under Disclosure, Due Diligence, Regulation A, Blog
Online investment platforms and the EB-5 Visa investment community have been abuzz lately following the June 23 announcement by the SEC that is has issued a final order against Ireeco, LLC and Ireeco Limited for acting as unregistered brokers in violation of Section 15(b) of the Securities Exchange Act. The practices by Ireeco, LLC included the establishment of an online portal that assisted foreign investors with selecting EB-5 Regional Centers and investment projects that suited the investor's interests. Ireeco was then paid a fixed amount of the administrative fee typically charged to EB-5 investors by the Regional Center when the investor made his or her…
This entry is filed under Bad Actor, Failure, Fraud, Offerings: EB5, SEC, Securities Law, Blog
A common theme that CrowdCheck is hearing from potential issuers looking into using Regulation A+ is that they are not certain they want to take on the obligations of the ongoing reporting for an indeterminate length of time. While understandable, the worries about the ongoing reporting requirements do not appear to fully take into account the options that companies have under Tier 2 of Regulation A. Further, when compared to the potential cost of conducting a Tier 1 offering, the ongoing reporting does not look so bad.
The SEC gives companies with ongoing reporting obligations under Tier 2 the ability to terminate those reporting obligations. Under Rule 257…
This entry is filed under Disclosure, Regulation A, SEC, Securities Law, Blog
As part of every due diligence exercise for operating companies, real estate projects, and investment funds, CrowdCheck will ask to see all of the minutes of the meetings of the Board of Directors or managing body, or the written consents in lieu of meetings, of the issuer in the securities offering. Documented minutes or consents is a fundamental requirement of good corporate governance that all too often is simply ignored.
At CrowdCheck we understand that for entrepreneurs running a lean startup, holding regular board meetings is time consuming and entrepreneurs would rather spend time on revenue building activities. However, board meetings and minutes…
This entry is filed under Disclosure, Due Diligence, Securities Law, Blog
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
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