Bad actors! Bad actors everywhere!
Well, maybe. The SEC doesn’t like bad actors in securities offerings. Since finalizing its Disqualification of Felon and Other “Bad Actors” from Rule 506 Offerings, the SEC has copied and pasted (with a few differences) the same disqualification terms into its proposed rules for securities crowdfunding and proposed amendments to Regulation A. As a reminder, the disqualification works like […]
Do it right the first time: Defective securities offerings and crowdfunding
For those who are not interested in reading a long, complicated, legal-centric analysis of the impact of defective securities offerings and crowdfunding, here is the summary: Securities offerings that aren’t done properly have to be undone; fixing them is a process that is expensive, time consuming, difficult to do correctly under state law, and exposes […]
Getting ready for seeking investment – Part 3: Holding and documenting board of director meetings
Every major action your company takes—amending the articles of incorporation, hiring company officers, authorizing the issuance of securities, entering significant contracts, etc.—requires approval by your board of directors. Every state requires a corporation to have a board of directors: some may require multiple directors; some require that there be at least one director. The rules […]
Crowdfunding can supplement your offering to accredited investors
One area of Title III of the JOBS Act that was rather vague was the ability of a company to offer securities through an offer relying on Regulation D at the same time as a crowdfunding offer. The statute was ambiguous on the matter, with provisions that were contradictory. The SEC cleared up the ambiguity […]
506(c):The return of caveat emptor?
Caveat emptor is Latin for “let the buyer beware.” The principle is most often applied in the sale of property — the buyer has sufficient amount of time to discover any defects and must live with those defects after the sale closes. There is no remedy available for a buyer that merely phones in the […]
What due diligence looks like – Part 3: Confirming waiver of preemptive rights
Back in June, CrowdCheck opened up its “What due diligence looks like” series with a fundamental concept: checking whether offered shares of stock are “duly authorized, validly issued, fully paid and non-assessable.” This is not just boilerplate language, but an actual legal requirement that gives investors confidence that they will be entitled to all the […]
Seeking outside investors? Better think about converting your LLC into a C Corp
Limited Liability Companies (LLCs) are a very popular form of organizing small businesses. In essence, they are a hybrid entity that provides the limited liability protection of a C corporation with the tax benefits of a partnership. LLCs are also incredibly easy to set up. While a C corporation requires the entrepreneur to think ahead […]
“Private” offers and the internet
The internet has gone through radical changes since the year 2000. Google became a verb, Facebook became a thing, cat memes come and go every 5 minutes, and everyone has their own blog (just like this one!). What has not changed since the year 2000 is the Securities and Exchange Commission’s opinion on what constitutes […]
Under Construction: Investor communication when crowdfunded campaigns are not yet ready for market
As a devoted fan of Sid Meier’s Civilization series working in the crowdfunding area, I couldn’t help but stumble across an interview with Sid Meier in which he is expresses his uneasiness about using a crowdfunding platform to fund a game. According to Meier, he would “be a little concerned with [crowdfunding] if [he] committed to X, […]
Another conference but still no crowdfunding rules
The New Year has come and gone and we are done with the first quarter of 2013, and yet we are still without SEC rules to implement crowdfunding as authorized by the JOBS Act. While some commenters on the SEC JOBS Act comment section have resorted to unproductive heckling of the SEC to get a […]