Crowdcheck Blog
Insights and information for online capital formation
If you raise capital online, you're probably a New Economy, Internet 4.0 type of company, right? Leverage the cloud, move fast, break rules (not securities rules), create synergies, it's all about the hustle. Right?
Maybe. Some of you new era companies should be huddling in your hoodies for shame, 'cos some of you have distinctly old school bylaws when it somes to stock certificates.
Yes, stock certificates. Those bits of paper with incomprehensible things written on them that say who owns shares in your company. Some of you still have bylaws that say that paper stock certificates MUST be issued. And you are engaging great new transfer agents who do everything…
This entry is filed under Crowdfunding, Due Diligence, Offerings: Traditional Regulation D, Regulation A, Rule 506(b), Rule 506(c), Section 4(a)(6), Blog
We live in a world without borders.
Securities laws, however, have clearly-defined jurisdictional limits, many of them inconsistent across countries.
We live in a world where information wants to be free.
Securities laws, however, have very clear ideas about how where information is allowed to go and who is responsible for it.
This is all becoming evident in the area of securities crowdfunding. I’ve come across a couple of issues recently which underline the need for a clear, comprehensible, cross-jurisdictional agreement as to whose laws will apply to what transactions and when people should be allowed to invest in an offering being made in another country.…
This entry is filed under Crowdfunding, Crowdfunding overseas, SEC, Section 4(a)(6), Securities Law, Blog
With one week to go we are hearing that a number of companies are realizing their financial statements are not going to be reviewed in time by their accountants. But they really want to launch on May 16!
So they are planning to file on Form C for amounts less than $100,000 and "certifying" the financials, with a view to filing an amendment later.
Think about this carefully before you do it. The financial statements (for any level of raise) are required to be prepared in accordance with Generally Accepted Accounting Principles (GAAP), reflecting all the requirements of GAAP with respect to revenue recognition, capitalization or expensing, and all that other…
This entry is filed under Crowdfunding, Disclosure, SEC, Section 4(a)(6), Securities Law, Blog
Four weeks out from Regulation CF's go-live date, and journalists, researchers, bloggers and anyone with access to the internet (including my cat) are asking small companies to comment on their plans to raise money under Regulation CF ("Title III").
Please quit. Y'all are getting CrowdCheck's clients into trouble.
For the third time in the last couple of days, I've seen an article or blog post in which a company that we are working with is asked to comment about their plans to raise money under Reg CF. These companies, being (a) super-enthused about crowdfunding and the ability to give their friends and fans the ability to share in any future success and (b)…
This entry is filed under Crowdfunding, Failure, Section 4(a)(6), Securities Law, Blog
We're 4 weeks out from Regulation CF (Title III of the JOBS Act) going live. This is exciting, right? Are you going to be one of the first companies filing a Form C? If you haven't got your financial statements sorted out yet, you probably aren't.
Any company looking to raise more than $100,000 must have their financial statements reviewed by a CPA. You'll need a balance sheet, profit and loss statement and cashflow statement covering 2014 and 2015 (or a shorter period if you haven't existed that long) and they have to comply with Generally Accepted Accounting Principles (GAAP). GAAP requires that your financial statements be prepared on an accrual, not a cash…
This entry is filed under Crowdfunding, Disclosure, SEC, Section 4(a)(6), Blog
Hey, remember when Oprah gave away all those cars and all the lucky recipients got a car with accompanying tax bill? We could have something like that in crowdfunding too.
For companies seeking crowdfunding, it's natural that they will seek to market their offering to the people who love their product or service. And a company's crowd is going to be super-happy not just to get the shares, but also more of the company's product or service. A company producing zombie movies can give away tickets to the next premiere. A candy company can give away calorific goodies.
And that's great, but in this regulated world we have to consider the tax and accounting…
This entry is filed under Crowdfunding, Disclosure, Regulation A, Section 4(a)(6), Securities Law, Blog
Oh, companies seeking crowdfunding under Regulation CF, it's going to be so tempting to do this. There'll be a time when you have all the information required by Rule 201 loaded on SuperPortal's site. All except the financial statements, which the accountant has not finished reviewing. She says her review isn't going to result in any material changes. And it's May 16, and you really want to be the first to go live on SuperPortal. What if you filed the Form C without the accountant's review? No-one would notice (the SEC doesn't officially review Form C filings), would they? And you could update the financials when you got them finished.
Don't do that.
For a…
This entry is filed under Crowdfunding, Disclosure, SEC, Section 4(a)(6), Securities Law, Blog
OK, that has GOT to be the most boring title for one of the most exciting developments in the securities markets, right?
I've mentioned before that the SEC is taking a "free market disclosure" approach to Regulation A. In contrast to what happens in the context of an IPO, where you can only make very limited communications outside the prospectus, in Regulation A you can make "testing the waters" communications up to the time the SEC qualifies your offering.
Additionally, you can market to prospective investors after qualification, and we are seeing a lot of this type of activity right now. As we know, "securities are sold and not bought" and traditionally the "…
This entry is filed under Crowdfunding, Disclosure, Due Diligence, Offering materials, Regulation A, SEC, Securities Law, Blog
Here's hoping that everyone in the crowdfunding community is planning to respond to the SEC's proposals on Rule 147 and 504. Even if they think the SEC got it right. And that they will comment on all aspects of the proposals, even the bits that the SEC got right.
Here's why. Let's say the SEC proposes a rule that says companies must disclose whether pets are permitted at the company's offices. Let's imagine nearly everyone thinks "Well, that's reasonable. I want to know how pup-friendly a company is." They don't comment because they assume the SEC will adopt the rules as proposed. But in the proposing release the SEC has asked whether this disclosure is…
This entry is filed under Crowdfunding, SEC, Blog
Actually, the SEC has no views specifically on singing kittens that I know of (although I am aware of at least one SEC staffer smuggling a cat into the building). The issue arises, though, in the context of "notices" of offerings under the new crowdfunding rules. As you probably know, the provisions of the JOBS Act limit the extent to which a company issuing securities can advertise the terms of the offering anywhere other than on the website of the broker-dealer or funding portal hosting the offering. The SEC's rules clarify what is permitted in these notices. The issuer can post a brief notice including information about the company and what it does and…
This entry is filed under Crowdfunding, SEC, Section 4(a)(6), Securities Law, Blog