Business Transactions

Changes in Regulation D and Form D

Changes are ahead for Regulation D and Form D. Regulation D to the Securities Act of 1933 provides three “safe harbors” that give companies some assurance that their capital-seeking activities are in compliance with federal securities laws. Form D is the notice filing a company must file with the Securities and Exchange Commission (SEC) when it relies on one of the Regulation D safe harbors.

The SEC describes the revisions as simplifying Form D and updating some of the information required by Form D. For example, while a company issuing securities will still need to identify its executive officers, directors, and promoters on Form D, it will no longer have to identify those who own ten percent or more of the company’s stock.

The big change for Form D is “how” it is to be filed. Starting on September 15, 2008, companies may file Form D electronically with the SEC. Electronic filing becomes mandatory on March 16, 2009. As a result, the SEC will be able to make information included on Form D filings more easily available to, interactive, and searchable by the public. Eventually, the SEC hopes to enable companies to file Form D with the SEC and with any applicable states via one electronic transaction. Forty-eight states, the District of Columbia, Puerto Rico, and the U.S. Virgin Islands accept filings on Form D.

Finding an Exemption to State Securities Registration for the Sale of Equity in Your Company

In my last postings, I discussed compliance with federal securities laws and finding an exemption to registration with the Securities and Exchange Commission when you want to raise money by selling equity in your company.

In this posting, I'll discuss compliance with state securities laws.

Finding an Exemption to Federal Securities Registration for the Sale of Equity in Your Company

In my last posting, I mentioned Rules 504, 505, and 506 of Regulation D as an exemption to federal securities registration.  If you meet all the requirements of Rule 504, 505, or 506, you are in a “safe harbor” and can be certain your offering qualifies as private under federal law.

All offerings under Rule 504, Rule 505 and Rule 506 have the following characteristics:

Selling Equity in Your Company and Compliance with Federal Securities Laws

In my last posting, I explained that when you sell equity in your company, you must either (i) register with the Securities and Exchange Commission (“SEC”) and with each state in which investors reside, or (ii) qualify for an exemption to registration. 

Registration is time-consuming and costly. Fortunately, private offerings qualify for an exemption.

Are You Selling Securities Without Realizing It?

If you take money from someone who will share in future company profits but will not actively participate in the operation of your company, you have sold a security.  This holds true whether you’re seeking to raise Ten Thousand Dollars or Ten Million Dollars.