Exemptions from Regular Disclosure Requirements
1) Private Issuer
You can be classified as a private issuer if
- you have no more than 50 shareholders (excluding employees), and
- your company has only sold securities to qualified purchasers (explanation below).
Qualified purchasers can include:
- directors, officers, employees, or control persons of the company
- family members (spouse, parent, child, etc) of directors, executive officers, or control persons
- close personal friends and close business associates of directors, executive officers, or control persons (see discussion below)
- accredited investors (see note below)
- current security holders.
Note: As long as your company meets the definition of a private issuer,
1. your shareholders can resell to one of the qualified purchasers in the list above, provided the directors of your company consent to any resale or transfer of shares, and
2. you are not required to file a report with the Commission.
2) Employee, Director, Officer, and Consultant
Even if your company is not a private issuer (you have over 50 shareholders or you have sold to investors who were not qualified purchasers), you can still sell securities to employees, executive officers, directors, or consultants of your company. If you use this exemption, you are not required to file a report with the Commission.
3) Other Exemptions
If you are looking to raise capital under other exemptions (for example family, friends and business associates; minimum amount; accredited investor; offering memorandum) you are required to file a report with the Commission within 10 days of the company receiving money from investors. If an investor wants to sell their shares, after they have been issued, they are required to sell under an exemption, or wait until your company has been a public company for at least 4 months.
i) Family, Friends and Business Associates
Investors under this exemption can include members of management and their family
members.
Investors under this exemption can also include:
- A close friend or family member: someone who has known your senior management team (director, senior officer, or control person) for a sufficient period of time and can assess your capabilities and trustworthiness.
- A close business associate: someone who has had sufficient prior business dealings with your business, to be able to assess your capabilities and trustworthiness.
