Regulation A (Reg A)

Regulation A (Reg A)

Reg A Exempt Offering

Our team of experts can assist you in drafting a Regulation A offering memorandum or prospectus for the purpose of attracting investors to securities you may want to issue.

This SEC regulation is meant to provide exemptions for businesses that want to receive up to $5 million dollars in public funding. This capital can be raised in the form of debt, equity, or a combination of the two. There are many advantages of utilizing this regulation, the most attractive being that the issuer can draft less necessary documents and meet fewer requirements than companies that fully register with the SEC. Usually, the sale of securities that are exempt occur when qualified investors and banking institutions are not available.

The following are qualifications as required by state and federal statutes for use of existing exemptions:

  • Need US$1 to US$5 million in funding
    Intrastate transaction (preferred, but not required)
    • Have a structured business plan
    • Been in business for at least three (3) years (not mining, oil and gas)
    • Have good credit
    • Have positive EBITDA
    • GAAP compliant financials
    • Able to be qualified as an issuing broker
    • Have experienced management team

The requirements for companies that will use a Regulation A, in accordance with the conditional small issues exemption from registration under the Securities Act of 1933 [17 CFR 230.251 – 230.263], are:

  • Must have specific business operations, cannot be a “blank check,” development stage with no specific plan or purpose other than a merger, investment company under the Investment Company Act of 1940, or conducting mining, oil or gas exploration and production operations;
    No minimum security/share price;
    • Financial statements do not need to be audited but must be GAAP compliant;
    • The issuing company must secure a written legal opinion of the offering by counsel;
    • Form 1-A filed with the SEC;
    • “Test the waters” before filing;
    • Twenty (20) days must pass between solicitation statement and first sale of the security;
    • Issuer qualified as an issuing broker in each state in which the security is offered;
    • Registration in each state in which the security is offered;
    • Once approved, seven (7) original copies to be filed with the SEC;
    • Filing fees are required in each state in which the security is offered;
    • The issuing company cannot offer a dividend or transact a stock split for at least two (2) years; and
    • The time frame from start to finish is approximately four (4) to eight (8) months.

Prospectus LLC can help answer any questions about a Reg A offering. We can assist in meeting any requirements, and most importantly help with the drafting of a prospectus or offering memorandum document. If interested, feel free to sign up for a consultation, or contact us with any questions!

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Regulation A (Reg A)

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