Regulation D 504 offering was first introduced with the Securities Act of 1933 and was instituted in 1982.  This exemption allows companies to raise their capital up to a million dollars by selling equity and debt securities.  These programs help to provide two things- an exemption to be able to sell securities privately without having to register the securities, and structure that allows for proper documentation.  If companies want to raise their capital with the help of individual investors, then Regulation D offerings can help.

If private companies want to raise their equity capital with the help of investors, they must be willing to comply with Regulation D 504 offering, along with any state and federal regulations.

For transactions that involve up to two investors, the proper transaction structure, documentation, and investment agreements are still very important.  Using Reg. D offerings to raise capital in a company will require a certain amount of documentation, along with a thorough business plan.  If you plan to use these offerings, you will want to make sure that you follow through with the Private Placement Memorandums and Subscription Agreements that are required by governmental regulations.  Without having these documents, it is virtually impossible to raise your capital.

Regulation D 504 Offering

Companies that are just now starting up and are looking to raise up to a million dollars may definitely qualify for the Regulation D offering rule.

This rule allows them to be exempt from federal registration requirements if they offer up and sell less than a million dollars’ worth of securities in a year’s time.

Companies are eligible to use the Regulation D 504 offering exemption as long as they are not blank check companies and they are not required to file a report as required by the Securities Exchange Act of 1934.  This exemption, however, does not allow the companies to advertise these securities publicly.  Purchasers will then receive securities that are restricted.  They are unable to sell them without registering them in the future.

Companies cannot sell unrestricted securities if:

  • The company registers its offering in states that require public registration statements.
  • The company sells its offering in states that require public registration statements.
  • The company sells their offering using solicitation and advertising to the public.

If companies take advantage of Regulation D 504 offering, they should still provide investors the information that they need in order to avoid any violations.  All information provided to the investors must be true and free of misleading information.  Companies should also not omit information.

Companies that use the Reg. D 504 offerings are not required to register securities, but they do have to file Form D once their securities have been sold.  This form notices that provides names and addresses of the owners of the company.  It does not really have a lot of additional information.

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