Forums: Discussions for entrepreneurs and small business.

Dear All,

Hi Tony, there are a couple of things to consider when answering your question. First of all, if you reach out to people to loan you money for your new venture, this won’t be a problem. Just make sure you work with a basic loan agreement that specifies the terms under which the money is loaned to you.

Accepting investments, in the sense of granting somebody an ownership interest in your company in return for cash, however, is a whole different ballgame. Transactions like this are closely regulated by the U.S. Securities Act of 1933 with the Securities & Exchange Commission (SEC) being the regulatory authority that monitors and enforces applicable laws and regulations under the Act.

To keep this rather complex subject as simple as possible, you can generally approach and accept investments from individuals and corporate entities that qualify as “accredited investors” without jumping through any regulatory hoops. The requirements to qualify as an accredited investor can generally be divided into two groups: (i) sophistication requirements (you need to know what you are doing) and (ii) wealth criteria (you need to be wealthy enough to be able to loose the entire investment).

Review Rule 501 of Regulation D here: http://www.sec.gov/answers/accred.htm

Once you go beyond approaching and working with accredited investors such as angel investors, VCs and the like, the subject becomes even more complex.

The structure under which you can approach wealthy individuals who may qualify as accredited or sophisticated investors, or who won’t have to meet any wealth or sophistication requirements in Regulation D, Rule 504, 505, or 506. Regulation D affords issuers an exemption from having to register their securities offerings with the SEC.

So the second part of my answer to your question is “yes, you can accept investments from just about anybody”, if you use the right framework.

If you feel like reading up on the subject, you can download our free whitepaper “How to reach High-Net-Worth Individuals with your Private Placement or Regulation D Offering”. It’s available at http://insights.fastventures.com/is-bin/guides/htg10302208/index.php


Most rules under Regulation D require that you supply potential investors with what’s known as “substantive disclosure document”, “prospectus”, or “private placement memorandum”. This document outlines the terms and conditions of your offering. If you are interested in learning more about private placement memoranda, you can download a sample private placement memorandum from our website at: http://insights.fastventures.com/premium/samples/ppm12052008/index.php


There are a couple to choose from.

I know that this post can’t possibly answer all your questions, but perhaps it can create a starting point for exploring your funding options under Regulation D in greater detail.

If you have any questions, please feel free to send me a PM.

I hope this helps. Good luck!


Mark



-------------------------


Jackson Steiner
http://www.JacksonSteiner.com

Advanced Document Design for entrepreneurs, intermediaries, and the financial services industry.
http://www.Publications.FastVentures.com

Hi Mark,

This isn’t going to be a problem, Anthony.

If the company that’s selling the shares (the issuer) is French you will need to abide by French securities laws for as long as you’re selling shares in France or other parts of the European Union.

I don’t have an intimate understanding of the applicable regulatory framework in these jurisdictions, but I know from previous professional engagements that this area is extensively regulated as well.

If you plan to sell shares of the French company in the U.S., all you need to do is getting an U.S. address and U.S. Federal Employer Identification Number (FEIN), which is issued by the Internal Revenue Services (IRS) and appoint an authorized person who will be the point of contact in the U.S.

The U.S. and the European Union have an agreement in place that guarantees corporate entities, which are headquartered in the EU to be recognized in the U.S. and vice versa.

So, next time you stop by at your neighborhood McDonalds, you will see that it’s operated by McDonalds Corporation – unless it’s a franchise.

Our firm is headquartered in London, so if you are looking for assistance to roll out your securities offering in France, the EU, and U.S., I’d like to strike up a conversation with you to learn more. Please feel free to send me a PM if you’re interested.

I hope this helps.


Mark



-------------------------


Jackson Steiner
http://www.JacksonSteiner.com

Advanced Document Design for entrepreneurs, intermediaries, and the financial services industry.
http://www.Publications.FastVentures.com

Hi Mark,