Equity Financing & Securities
Equity Funding, Ownership, and SEC Securities Law
Providing you with a step by step walkthrough of securities law compliance matters, corporate governance and contracts needed for equity financing. Startup companies and cryptocurrency operators need to be aware of the legal documents and filings required to raise monies and properly structure deals. Consulting an attorney on your financial agreements is the best practice for avoiding future trouble regardless if you’re just starting up or considering restructuring for expansion. Provided is a partial list of documents and regulations that will need to be considered when handling securities matters all of which and more are handled by Attorney Lois Li.
- Convertible Note
- Convertible notes are debt instruments that contain maturity dates and interest rates. They are issued in seed financing rounds to raise capital that can be later converted into equity shares within the company.
- Simple Agreement For Future Equity (SAFE)
- A SAFE agreement provides an investor equity in the company once a predetermined event triggers the contract. They are considered the simplest, cheapest, and fastest contract available for startups to raise funding. They typically do not have a maturity date.
- Series A, B, C, Preferred Stock Issuance And Establishment
- Every series of capital raising requires the establishment of the Preferred Stock that will be offered. Following regulation and best practices during these critical steps avoids future complications during subsequent series issuances.
- Certificate Of Designation For New Classes Of Shares
- The Certificate Of Designation can be considered the terms and conditions of the Preferred Stock being issued. This would include the rights, power and restrictions or limitations placed on the Preferred Stock.
- Subscription Agreements
- Identifies the terms of the investment, identifies all of the parts of the investment such as the number of shares and price.
- Investor Rights Agreement
- Identifies the rights and limitations for both the investor and issuing company. Stating what can and can not be done with the shares in relation to transfers, indemnification clauses, obligations, and covenants.
- Private Placement Memorandum
- A Private Placement Memorandum is the large informational package provided to investors that identifies the company and investment being offered. This document goes into specific detail about the company, products, management, financials, risks, and offering terms.
- Securities Law Compliance Filings
- Timely filing of the securities documents is only one step within the process of understanding what documents are required and correctly generating those documents. Any imperfections in the process can lead to missed deadlines, fees, fines or having to restart the entire process.
- Reg D, Reg S, Reg A, Reg A+, And Reg CF Exemption Offering Documents
- These are Securities and Exchange Commision (SEC) regulations that govern securities offering exemptions. Qualifying for one of these exemptions circumvents the need to file a securities public registration statement with the SEC, which can be a lengthy process and cost prohibitive. Improper filing of SEC documents can be detrimental to a securities offering.
- Form D, Form CF Preparations
- These are the required forms to request one of the securities exemptions to get around from filing registration statements with the SEC. Knowing which form to use is only the first step in the process as properly filling the form out and complying with the regulations comes next and is equally important.
- State Level Securities Filings
- Adding to the complicated mess of securities filings on a federal level is the individual state requirements for securities filings. Each state has their own procedures and requirements.
- Establishment Of Employee Option Pool
- Employee Stock Options
- Option pool is a percentage of a company reserved for employees. New companies create option pools by setting aside common stock shares, and granting these shares to employees as a way to pull new talent into a startup. Option pools are also called employee stock option pool (ESOP).
- Equity Incentive Plan And Award Agreements
- Stock Option Package, Restricted Stock Award Agreement, And Restricted Stock Unit Agreement
- For ongoing employees and executive payouts
- Transfer Of Stock Opinions
- Rule 144, Exemption Categories
- Restricted or control securities, provides a safe harbor for selling
- Vesting periods
- The time