Private Placements
PRIVATE PLACEMENT (a.k.a. Regulation D – 504, 505 & 506)
There are three categories of Private Placements based on how much money you intend to raise.
-
504 Filing: For companies that need to raise $1M or less within 12 months
-
505 Filing: For companies that need to raise $5M or less within 12 months
-
506 Filing: For companies that need to raise an unlimited amount within 12 months
Highlights of Regulation D offerings
A business can solicit individuals or groups that have a pre-existing relationship with the company. Most often this is a company’s own customers but also includes: suppliers, vendors, distributors, employees, consultants, etc.
- The company can sell stock to as many as 35 unaccredited investors (and more in many states) and to unlimited accredited investors.
- The offering document requires less disclosure than a DPO and no review by the state. Filing is only required after the first sale.
- For a 504, no audited financials are required, allowing companies to move quickly with minimal legal and accounting expense.
- The company can sell stock in multiple states.
- Reg D Offerings are often used to secure an initial round of funding in preparation for a Direct Public Offering.