Under the federal securities laws, a company that offers or sells its securities must register the securities with the Securities and Exchange Commission (“SEC”) or find an exemption from the registration requirements. Regulation D of the Securities Act of 1933 (“Reg D”) is a regulation promulgated by the SEC that governs the exemptions for the sale of a company’s equity or debt securities. Although companies that comply with Reg D need not register their offering of securities with the SEC, they are required to file a “Form D” with the SEC. The Form D is an electronically filed notice to the SEC that the company is claiming its offering falls under one of the Reg D exemptions.
Rule 506(b) of Reg D is the most common exemption we use when filing Form Ds on behalf of our capital-raising clients. Rule 506(b) provides an exemption for private fundraising and requires that the company raise capital without advertising the securities to the general public. Under Rule 506(b), there is no limit to the amount of capital that can be raised, and the company is permitted to sell securities to an unlimited number of “accredited investors”. An accredited investor is a person or business entity that satisfies certain requirements related to income, net worth, asset size, governance status, and/or professional experience. Typically, an investor attests to his/her/its own status as an accredited investor in an investment document called a Subscription Agreement. There is no governmental or entity that provided an accreditation. To learn more about what it means to be an accredited investor, read Much ado about Nothing: The SEC to Change the Definition of Accredited Investor.
The SEC requires that a Form D be filed within 15 days of taking the first investor’s funds in a capital raise round. Hunter Business Law can assist any company raising capital with filing a Form D; however, it is a process that you can do yourself. Below is a step by step guide for filing your Form D.
If you need assistance with filing your Form D, or would like to further understand Regulation D, Hunter Business Law can help. To arrange a consultation, visit our contact page HERE.
This Blog was written by Hunter Business Law Attorney Stephanie Boussias.
DISCLAIMER: This blog is for educational purposes only and does not offer nor substitute legal advice. Additionally, this blog does not establish an attorney-client relationship and is not for advertising or solicitation purposes. Any of the content contained herein shall not be used to make any decision without first consulting an attorney. The hiring of an attorney is an important decision not to be based on advertisements or blogs. Hunter Business Law expressly disclaims any and all liability in regard to any actions, or lack thereof, based on any contents of this blog.