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When companies issue out stock, also known as securities, the securities must be registered with the SEC. Registration documents include detailed disclosure, financial statements, audits, etc. The total process requires the professional help of attorneys, accountants, and the Securities Exchange Commission review which can last up to 120 days. This can be a costly expense, even before the stock offering brings in any capital.
Regulation D is one way to be exempt from the SEC registration process, which is through what is called a private placement. In the past there were exemptions available through the Securities Act of 1933, but the provisions were very vague, and a risky endeavor for business owners.
The SEC put together objectives and rules for exemptions to take place in 1982 when they adopted Regulation D. Offerings under Regulation D rules have become a very popular method for small companies to raise money through private investors. Reg D does not make you a public company.
Regulation D allows Corporations and Limited Liability Corporations of small size to sell stock using a Private Placement Memorandum. This is a great way to raise funds quickly and effectively, and it allows you to raise money through friends and family. There are few firms that are knowledgeable enough to help companies go through the process of a Regulation D offering, as it can be very complex. |
