Regulatory Compliance
Corporate and Securities Law
To scale your company’s growth and increase your personal wealth you may need additional funding source beyond your friends and family and the earnings your business generates through its own operations. Qualification to finance through institutional borrowing, including traditional bank loans, may be difficult to meet while often required personal guarantees by business owners for repayment of these loans may make them unattractive.
For equity financing through either angel or venture capitalist investors, for a multi shareholder company, I can assist with preparation of a shareholders’ agreement to establish voting rights that can best resolve potential disputes. For privately held early stage companies, funding can be obtained through exempt offerings that companies can qualify for under SEC Regulation D, Qualification under this Regulation can enable your company to avoid the burdensome reporting requirements that come with a publicly traded offering . A form D that contains basic information on your company will need to be filed with the SEC within 15 days of your company’s first securities’ sale. If your company can qualify for investor fund raising under Regulation D, rule 506(c) it can raise an unlimited amount of capital through general solicitation (via email marketing and radio ads) but all investors will need to be accredited. To be accredited, investors must meet either income or net worth requirements. To be accredited an investor must have annual income of $200,000 or $300,000 jointly with a spouse during the past two years or net worth of $1,000,000 not including their residence.
Alternatively, if rule 506(b) is better suited to your company’s situation, this option also allows for the raising of an unlimited amount of capital, while permitting up to 35 nonaccredited investors. Unlike rule 506(c) this rule does not allow for general solicitation. I can assist your company to identify, prepare and file the necessary documents to qualify it for funding through an exempt offering.
Additionally, for smaller capital raises crowdfunding can be used through a designated portal, but there are investment limits with additional disclosure requirements that go beyond rule 506(b) and 506(c). With crowdfunding there is no limit on the number of unaccredited investors but there is a cap on total funds raised of $5,000,000.
Corporate Governance Implementation
In helping you to meet your company’s corporate governance requirements, whether it’s a startup or mature company, I can assist you to develop your company’s bylaws or regulations, and to adopt resolutions including actions that may be taken without a meeting and that enumerate the duties of executive officers. Another area of guidance I can provide is to assist you in standing up board committees that focus on compensation, audit, and finance. Additional areas of guidance I can provide include consultation as to what proportion of your board of directors should consist of inside versus outside directors, what constitutes a quorum, and well as whether or not to implement an advisory board to provide expertise that can better inform key board decisions.
Cap Table Implementation and Management
I can assist your company with tracking the relative ownership of each shareholder to make sure that their ownership percentages are accurate, transparent and up to date. This is essential when it comes to any kind of stock based employee compensation program where stock options are initially set aside for future grants to employees or independent contractors. Getting the employee stock option pool right sized is essential to recruiting top talent to your company as well as in retaining and motivating them while working there.
If your company’s financing strategy involves notes or preferred stock that you provide for future conversion to common shares, this adds an additional layer of complexity in updating your company’s cap table to accurately reflect your shareholders’ ownership percentages. I can help you with cap table maintenance addressing the above described factors and any additional complexities to enable your company to maintain an accurate and current reporting of the relative percentage of ownership for all your shareholders.