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Reg A+

REG A (Reg A+), under the 2012 JOBS Act was clearly to “democratize” raising capital, especially for small businesses. This also gave retail investors the opportunity to invest directly in a private equity investments. 

The Details

The JOBS Act, Title IV, known as Regulation A+ or Reg A, went into effect on June 19, 2015 which allows companies to raise money from the entire public and not just wealthy investors or institutions. Reg A+ is also known as a "Mini IPO". Mid-stage companies, corporate spinouts (like management buyout), and low risk, large upside startups are great for Reg A+ offerings. 

  • Offering Tier 1, for offerings of up to $20 million in a 12-month period

  • Offering Tier 2, for offerings of up to $75 million in a 12-month period.

  • For offerings of up to $20 million, companies can elect to proceed under the requirements for either Tier 1 or Tier 2.

  • Additional requirements apply to Tier 2 offerings, including limitations on the amount of money a non-accredited investor may invest, requirements for audited financial statements and the filing of ongoing reports. Issuers in Tier 2 offerings are not required to register or qualify their offerings with state securities regulators.

  • Companies must be U.S. or Canadian

  • Regulation A+ has a significant cost and requires substantial work to prepare your offering document.

The Process

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Form 1-A

SEC Form 1-A is an offering statement required by the Securities and Exchange Commission (SEC) for the registration of certain securities that are qualified under Regulation A.

SEC Form 1-A is filed to disclose key information to investors as a means of preventing fraud in the sale of the securities that are offered.

Businesses will need legal counsel, independent auditors, accountants and underwriters to help them with this preparation.

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Raise Capital

After the SEC review the Form 1-A offering statement and it's declared “qualified” by a “notice of qualification” (as opposed to “effective” in a traditional IPO context) companies may begin selling securities.

Issuers must choose whether they want to conduct their offerings under Tier 1 or Tier 2 of Regulation A+. While the two tiers share several similarities, this chart outlines the major differences between the two frameworks.

 

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Accept investments

With proper planning you should start receiving investments on the launch of your campaign.

 

On average, campaigns run for 60-90 days. But every campaign must run for a minimum of 21 days.  

Per regulations set forth by the SEC, each company must disclose any material changes during the time of their fundraise. Each investor should be notified and investors must re-confirm their investment within 5 business days. If an investor does not re-confirm their investment within 5 business days of a material change in the offering, their investment will be automatically canceled.

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Closing

We will work with our escrow partner to make sure the funds from escrow will be transferred to the company upon completion of the offering. 

Investments are made official when the campaign has ended. Investors will have access to their summary statements and a portfolio of their investments once they have been closed.

 

Note that investors have the right to cancel their investment for any reasons up to 48 hours before a closing occurs.

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Post Campaign

If the raise fails, any committed funds are returned to investors. If the Regulation A+ is successful, companies have three ongoing reporting requirements:

  1. Annual reports: companies must disclose information about their business operations and transactions, analysis and two years of audited financials.

  2. Semi-annual reports: companies must provide unaudited financial statements as well as management discussion and analysis

  3. Event reports: in which companies must file in the event of a material change to the rights of shareholders or to the nature of the business itself

  4. If a company has fewer than 300 shareholders of record, they may file to withdraw  from these reporting requirements after the first annual report. On the flip side, if the company meets certain asset and number-of-shareholders tests and has a public float of more than $75M (held by non-affiliates) or annual revenue greater than $50M annually, the company will enter a two-year transition period to begin complying with the reporting requirements of fully public companies.