Raise money under the SEC's New Regulation A+

All the things you can do to raise money under the SEC’s New Regulation A+  since the SEC extended an exemption policy for smaller issues as required under Title IV of the Jumpstart our Business Startups ("JOBS Act").

Highlights:

1.  General Advertising and Solicitation Allowed (including internet and social media)

2.  Raise up to $50 million

3.  All investors whether accredited or unaccredited

4.  No requirement to verify investor status

5.  No limit on amount of investors

6.  Easier SEC registration process (Tier I)

7.  Avoid State Blue Sky Filing requirements (Tier II)

On March 25, 2015, the SEC adopted final rules implementing Title IV of the “Jumpstart Our Business Startups Act” (the “JOBS Act”) by amending SEC Regulation A to make two new exemptions for securities offerings by private U.S. and Canadian companies, which is now known as Regulation A+.

The SEC released a statement that:

"The updated exemption will enable smaller companies to offer and sell up to $50 million of securities in a 12-month period, subject to eligibility, disclosure and reporting requirements."

These exempt offerings are referred to as Tier 1, for offerings of up to $20 million annually, and Tier 2, for offerings of up to $50 million annually. 

Tier 1, which would consist of securities offerings of up to $20 million in a 12-month period, with not more than $6 million in offer by selling security-holders that are affiliates of the company issuer. The increase in the offering maximum amount from $5 million to $20 million could make capital raises under this alternative more attractive to a number of companies in need of capital as the cost of preparing an offering memorandum can be a smaller amount to that of the offering size.  

Tier 2, which would consist of securities offering of up to $50 million in a 12-month period, with not more than $15 million in offer by selling security-holders that are affiliates of the issuer.  The new Tier 2 creates a form of "mini-public offering" with a number of reporting requirement that resemble those of a normal full fledged offering, for example, two years of audited financial statements and the new periodic and current reporting requirements.

The rules limit the amount of securities that can be sold by selling shareholder at the time of the company issuance of its first Regulation A+ offering and during the 12 months following to no more than 30% of the total offering price of any instance of that offering. The registration process is done online via the SEC’s program called EDGAR. Tier 2 offerings are exempt from state blue sky laws and Tier 1 offerings are not exempt.

The new SEC regulations are complex and often technical.  The foregoing article should not be taken as legal advice or presupposes that all of the information is included with respect to any particular company’s or individual’s circumstances. 

COPYRIGHT & DISCLAIMER

Tifanie Jodeh is Partner at Entertainment Law Partners dedicated to corporate, business and entertainment affairs.  Tifanie Jodeh grants column recipients permission to copy and distribute this column and distribute it free of charge, provided that copies are distributed for educational and non-profit use, no changes or revisions are made, all copies clearly attribute the article to its author and include its copyright notice.

DISCLAIMER: Readers should consult with a lawyer before solely relying on any information contained herein.