With a Reg D (506c) offering, the company can raise an unlimited amount of capital, but only from accredited investors. It is allowed for the issuing companies to promote and advertise their offerings. The issuer companies have to take steps to verify that the investors are actually accredited. Although the companies don’t need to register with the SEC, they have to file a Form D, which includes information about the company’s offering, promoters, the companies themselves, and some further information about the offerings.
Reg S can be a good compliment to Reg D, in that Reg S allows non-US investors to invest in a US company on a similar basis to the Reg D terms, without the need to be accredited investor.
Regulation S provides an SEC compliant method for company capital offerings that are made outside the U.S by both foreign and U.S issuers. Regulation S, which was adopted by the Securities and Exchange Commission (the “SEC”) in 1990, provides that offers and sales of securities that occur outside of the United States are exempt from the registration requirements of Section 5 of the Securities Act of 1933 (the “Securities Act”).
Regulation A+ allows startups and mid-stage companies to use Concordia Boston’s equity marketing platform to raise as much as $50M from both accredited and non-accredited investors. Reg A+ is broken up into two tiers, Tier 1 and Tier 2. Tier 1 allows you to raise up to $20M, while Tier 2 allows you to raise from zero to $50M.
This means that start-ups and growing businesses don’t need an angel investor worth millions or billions of dollars to help take their company to the next level. Regulation A+ dramatically improves the funding prospects for companies that are too small to make a regular IPO on the NASDAQ, for example, or which do not have access to a Private Placement or to Venture Capital. It completely changes the prospect of raising capital, giving start-up, mid-stage, and late-stage companies the opportunity to raise capital from many smaller, individual investors, who become owners of shares in the company. While of course, Angel investors and professional investors are encouraged to invest too.
If you set up legal Headquarters for your company in the USA or Canada then you are allowed by the SEC (Securities and Exchange Commission) to use Reg A+ to raise capital. Most companies that take this route set up a “C” Corporation in Delaware. We can introduce you to good attorneys.
If most of your investors will come from your country and few from the US, then using a Tier 1 Reg A+ can be a very good fit. The advantages of Tier 1 are that you do not have to file an Audit with the SEC and you do not have to make revenue and profit reports every six months after your offering completes. The big advantage of Tier 2 is that when you raise money from investors in US States, you do not have to satisfy the US State’s Blue Sky regulations, which makes the process faster and simpler. If you will raise capital from US investors then Tier 2 is the way to go for your offering.
You can list your company on the NASDAQ, NYSE, on the OTCQB or the OTCQX, or choose not to list your company at all. The SEC allows the investors in Reg A+ offerings to sell their shares after the offering. Your company can choose to lock the shares or to provide alternative forms of liquidity. The investors in a Reg A+ offering can come from anywhere in the world.
Summary of Alternative Securities Offering Under Current Legal Frameworks