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California Business and Securities Attorneys Methven & Associates PC

Methven & Associates PC is a law firm handling business and real-estate law. One of our specialties is securities law: We advise companies and funds (syndications) that are raising money what type of offering is best for them and handle the disclosure documents and filings. See below for more information on this.

Our clients' businesses range in size from individuals and an entrepreneurs' first start-ups through large multinational corporations. We provide legal advice and representation regarding contracts, corporations, LLC's, LLP's, partnerships, trademarks and other intellectual property, web-site terms and conditions and privacy policies, licenses, confidentiality agreements, leases, real estate syndications and investment, and related litigation, arbitration and mediation. Read more about our services.

If you think we can help you with your business case, securities issue, intellectual property, or some other legal matter, please contact us.

Learn how to raise money without violating the law at our Securities Law blog. Also, some videos about securities offerings are available below.

The SEC has not yet released its final rules on true crowdfunding (where stock or promissory may be sold) or on proposed Reg. A+ offerings. Some of the most common offering types are as follows.

The traditional federal Rule 506b offering allows an unlimited number of accredited investors and up to 35 non-accredited but sophisticated investors. (Accredited is basically $1 million in net assets, excluding the primary residence or $200,000+ in annual income. Sophisticated is intelligent in terms of investment, either personally or through an independent investment advisor.) Investors may be from any state or from foreign countries. Targeted contacts may be made to persons the company reasonably believes are qualified. Web sites and social media cannot advertise any past, present or future offerings, but if very careful can describe what the company does and direct those who want further information to complete an investor questionnaire. At least some audited financials may be required if the company is not a start-up and at least some investors will be non-accredited. No prior approval by a securities agency is required, but certain filings must be made.

A similar California-only offering, the 25102(f), is limited to California companies and investors only but also allows a third category of investors – basically long-term friends, family and colleagues – even though they are not accredited or sophisticated.

The relatively new advertised Rule 506c allows full public advertising but is limited to accredited investors only. In addition, it requires the investors to provide documentation providing some evidence that they are accredited; many investors are resistant to this.

California has the 25102(n) offering that is limited to California companies and investors but allows “half-accredited” investors (with roughly half the requirements of an accredited investor) and allows full public advertising (including on the Internet) of a brief “tombstone ad” that sets out the offering type and price.

The federal S-1 offering requires advance approval by the SEC and audited financials – and it requires the company to make quarterly SEC filings. On the other hand, it has no requirements for investors, it can be fully advertised and, if additional steps are taken, can lead to the stock being traded on the over-the-counter market.

California has a comparable 25113 offering for California companies and California investors only that does not require audited financials. It must be approved by the California securities division rather than the SEC. There are additional requirements that must be met if a real-estate fund is involved.

Foreign investors (non-U.S. citizens residing outside the U.S.) can be treated as U.S. investors or they can made an offering using federal Reg. S. With Reg. S the foreign investors must agree in writing to never sell the securities back into the U.S. (although they can sell them outside the U.S.) When a Reg. A is used, basically there are no restrictions on the offering (at least as far as the U.S. is concerned) and the investors do not have to meet any qualifications.

Raising Money Legally

by Bruce Methven

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