Tim Sullivan Authors Article, "Securities Rules for Private Equity Financings"

October 14, 2010

In order to sell securities, a company must either register the issuance under federal and state securities laws or find an exemption from such registration requirements. The issuance of a security pursuant to the registration provisions of federal and state law is a time-consuming and costly process. Most small to mid-size businesses do not want to spend the money or time it would take to register the securities. In addition, the registration of securities with the SEC will subject the issuer to continual reporting requirements.

The question is how does one avoid registering the sale of the securities under federal or state law?

Federal and state law offer a number of exemptions from registration. These exemptions exempt the particular transaction (e.g., a sale to an accredited investor) not the underlying security. Subsequent sales of the security may have to be registered if no exemption is available.

Hinshaw & Culbertson LLP is a national law firm with approximately 500 attorneys providing coordinated legal services across the United States and in London. Hinshaw lawyers partner with businesses, governmental entities and individuals to help them effectively address legal challenges and seize opportunities. Founded in 1934, the firm represents clients in complex litigation and in regulatory and transactional matters.

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