Most dental practices are unaware of the many, and often unthought of, items that need to be continually addressed for maintenance of the dental entity.
Read moreAttorney Ellie Braun discusses Stock Legal's Subscription Package services.
The Securities Act of 1933 (Act) requires that every offer and sale of a security be registered with the U.S. Securities and Exchange Commission (SEC). However, the Act provides exemptions from registration in certain situations. The good news - most start-up companies who want to raise capital will fall within one of the SEC exemptions and therefore, don’t need to register with the SEC. However, all of the SEC exemptions contain strict disclosure and anti-fraud rules. There is potential for severe civil and even criminal liability if the SEC or state securities commission determines that securities fraud has occurred. Additionally, the members of a company can be sued individually if the company fails to make material and truthful disclosures. Therefore, it is crucial that a company raising money gets this right. So, what is the best approach?
The traditional approach to satisfying the SEC disclosure requirements is a private placement memorandum (PPM). A PPM is very long (often hundreds of pages) and prohibitively expensive for many start-ups. Law firms have been known to charge upwards of $100,000 to prepare PPMs. At Stock Legal, we work to meet the SEC disclosure requirements by preparing a comprehensive subscription package. The subscription package contains many of the same elements as a PPM, but we are able to provide it at a more reasonable cost by working collaboratively with our clients. We provide the format for information, but allow our clients to do the heavy lifting of providing all of the necessary company specific information. By doing this, we’re able to provide our subscription packages for a fixed fee so that our clients know, up front, the cost of preparing the necessary documents for their capital raise.
What do we include in a subscription package? Our subscription package consists of three documents: (1) a confidentiality agreement; (2) a term sheet; and (3) a subscription agreement.
The confidentiality agreement is between the company and a potential investor whereby the potential investor agrees to keep confidential all information provided to the potential investor by the company. For obvious reasons, it’s important for a company to put a confidentiality agreement in place before sharing important and confidential information with a potential investor.
The term sheet is a brief document setting forth the basic terms and conditions of the capital raise. A term sheet may change based on the feedback a company receives from early potential investors. So, subsequent revisions to a term sheet are common.
The last document in our subscription package is the subscription agreement. Once a potential investor is ready to become an actual investor, he or she will sign a subscription agreement with the company. At Stock Legal, our subscription agreement has 7 parts:
A PPM is one way to ensure that a company satisfies the SEC disclosure requirements and anti-fraud rules. However, PPMs are not a good option for most start-up companies because of their prohibitive cost. A subscription package is a well-designed alternative to a PPM that can be prepared for a more reasonable cost. By working collaboratively with our clients to complete subscription packages, Stock Legal is able to substantially reduce cost which enables us to offer these subscription packages for a fixed fee.
*The choice of a lawyer is an important decision, and should not be based solely on advertisements.*
Most dental practices are unaware of the many, and often unthought of, items that need to be continually addressed for maintenance of the dental entity.
Read moreIn this post, we’ll delve into some of the most critical provisions of the APA: representations and warranties, covenants, and indemnifications.
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