Regulation A+   For the past 80 years only accredited investors have been able to invest in startups in America.  That has changed with the implementation of the JOBS Act, and Regulation A+, one of the biggest changes in the financial industry.

Regulation A+ FAQs.

 

Regulation A+ (Mini IPO) is a newly revamped securities regulation that companies can rely on to raise up to $50 million from both accredited and non-accredited investors.  In traditional Regulation D Offerings offerings, companies are either limited to having up to 35 non-accredited investors or completely prohibited from having any non-accredited investors altogether.  Accredited investors make up less than 1% of the US population, meaning 99% of people previously couldn’t invest in startups even if they understood the risk and had the liquid capital to deploy.

Regulation A has been around for years, but has not been widely used mainly because of the way the rules were written, making raising capital quite inefficient.  In fact, the Securities and Exchange Commission (SEC) estimated only 26 offerings were conducted annually and they were capped at an upper funding limit of $5 million.  Now, with Regulation A+, companies can raise up to $20 million on Tier 1 and up to $50 million on Tier 2, which changes the game.

One of the greatest challenges for companies wanting to do a Reg. A+ Offering is the upfront costs … legal, accounting, promotion, etc.  These costs can range from $40,000 – $100,000 or more.  We may be able to help with our Reg. A+ funding solution

HIGHLIGHTS OF REGULATION A+

Regulation A+ implements Title IV of the JOBS Act and provides for two tiers of offerings:

  • Tier 1, consists of securities offerings of up to $20 million in a 12-month period, with not more than $6 million in offers by selling security-holders that are affiliates of the issuer.
  • Tier 2 consists of securities offerings of up to $50 million in a 12-month period, with not more than $15 million in offers by selling security-holders that are affiliates of the issuer.

In addition to the limits on secondary sales by affiliates, the rules also limit sales by all selling security-holders to no more than 30 percent of a particular offering in the issuer’s initial Regulation A offering and subsequent Regulation A offerings for the first 12 months following the initial offering.

For offerings of up to $20 million, the issuer can elect whether to proceed under Tier 1 or Tier 2.  Both tiers are subject to basic requirements as to issuer eligibility, disclosure, and other matters, drawn from the current provisions of Regulation A.  Both tiers also permit companies to submit draft offering statements for non‑public review by Commission staff before filing, permit the continued use of solicitation materials after filing the offering statement, require the electronic filing of offering materials and otherwise align Regulation A with current practice for registered offerings.

Additional Tier 2 Requirements

In addition to these basic requirements, companies conducting Tier 2 offerings are also subject to other requirements, including:

  • A requirement to provide audited financial statements.
  • A requirement to file annual, semiannual and current event reports.
  • A limitation on the amount of securities non-accredited investors can purchase in a Tier 2 offering of no more than 10 percent of the greater of the investor’s annual income or net worth.

Like an IPO, Reg A+ allows companies to offer shares to the general public and not just accredited investors. Companies looking to raise capital via Reg A+ will first need to file with the SEC and get approval before launching their mini-IPO. However, the fees associated with a Reg A+ offering are much lower than a traditional IPO and the ongoing disclosure requirements are much less burdensome, effectively making a Reg A+ offering a mini-IPO.

Our Regulation A+ Offering Kits include all of the documents you need for your Reg. A+ offering, Tier I or Tier 2, and include the Offering Circular Template for Form 1-a, Parts II and III, Form 1-A and more.  Our Regulation A+ Offering Kits are available for your corporation or LLC.  

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Be sure to check out our Regulation A+ funding solution and learn how we may be able to help you with the costs of your Regulation A+ offering.

Preemption of Blue Sky Laws

In light of the total package of investor protections included in amended Regulation A, the rules provide for the preemption of state securities law registration and qualification requirements for securities offered or sold to “qualified purchasers,” defined to be any person to whom securities are offered or sold under a Tier 2 offering.

Regulation A+ Summary

REGULATION A+ OFFERING DOCUMENTS

Our Regulation A+ Offering Kits include all of the documents you need for your Reg. A+ offering, Tier I or Tier 2, and include the Offering Circular Template for Form 1-a, Parts II and III, Form 1-A and more.  Our Regulation A+ Offering Kits are available for your corporation or LLC. 

Regulation A+ offerings are filed with the SEC on a Form 1-A through the SEC’s EDGAR system. 

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 Our SEC compliant documents and other services are not a substitute for the advice of legal counsel.