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Due Diligence

Delivering All Things Crowdfunding and Online Investing

December 19, 2016 by Sara Hanks
If you raise capital online, you're probably a New Economy, Internet 4.0 type of company, right? Leverage the cloud, move fast, break rules (not securities rules), create synergies, it's all about the hustle. Right? Maybe. Some of you new era companies should be huddling in your hoodies for shame, 'cos some of you have distinctly old school bylaws when it somes to stock certificates. Yes, stock certificates. Those bits of paper with incomprehensible things written on them that say who owns shares in your company. Some of you still have bylaws that say that paper stock certificates MUST be issued. And you are engaging great new transfer agents who do everything...
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August 08, 2016 by Diana Leung
*Our summer intern, Diana Leung, who will be heading to Georgetown University in the fall, weighs in on disclosure compliance.   The brilliant start-up companies that define crowdfunding are transforming the meaning of the American Dream. Citizens not only have an equal opportunity to achieve prosperity through the traditional conduits of society but can now do so through their own original thoughts and ideas. Entrepreneurial success is no longer limited by the confines of well-established industries nor to the incredibly wealthy – from biodegradable toothbrushes to microwavable notebooks, crowdfunding is bringing creativity to fruition. But, crowdfunding still...
This entry is filed under Crowdfunding, Disclosure, Due Diligence, Securities Law, Blog
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July 26, 2016 by Andrew Hanks
Read CrowdCheck General Counsel Huiwen Leo's article featured on Locavesting!
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December 13, 2015 by Sara Hanks
OK, that has GOT to be the most boring title for one of the most exciting developments in the securities markets, right? I've mentioned before that the SEC is taking a "free market disclosure" approach to Regulation A. In contrast to what happens in the context of an IPO, where you can only make very limited communications outside the prospectus, in Regulation A you can make "testing the waters" communications up to the time the SEC qualifies your offering. Additionally, you can market to prospective investors after qualification, and we are seeing a lot of this type of activity right now. As we know, "securities are sold and not bought" and traditionally the "...
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September 24, 2015 by Andrew Hanks
Thomson Reuter's Practical Law interviews CrowdCheck CEO Sara Hanks  on trends in equity crowdfunding and key issues for companies considering a crowdfunding offering.   Expert Q&A on Equity Crowdfunding
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July 29, 2015 by Andrew Stephenson
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
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June 17, 2015 by Andrew Stephenson
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
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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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March 13, 2015 by Andrew Stephenson
One of the things that any securities due diligence should look at is whether a company or investment vehicle is in good standing with its state of organization. Good standing indicates that the company is validly formed, exists as a separate legal entity, and is up to date with its obligations for that particular state. For Delaware, that includes paying annual franchise taxes; and for many companies that consider the representation that the company "is in good standing" to be mere boilerplate, the March 1 filing deadline for Delaware franchise taxes has come and gone. Failure to pay in time is the principal reason that a company would fall out of good...
This entry is filed under Disclosure, Due Diligence, Blog
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January 15, 2015 by Sara Hanks
Well that didn’t take long. You know those Nigerian scams where someone emails you and asks you to help him spirit millions of dollars out the country, except you have to front him the bank fees? Well, it’s turned up in crowdfunding. We are aware of a couple of instances like this: Company posts its offering on a crowdfunding site. Investor who claims to be a money manager contacts company for details.  The investor may come from a respectable country where a lot of money managers are based, and it may have an online presence that seems to check out. Anti-money laundering and sanctions checks may come back negative. But then the investor raises an issue. It...
This entry is filed under Due Diligence, Fraud, Blog
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