Introduction
Regulation A+ offerings are a means for businesses to raise capital from both accredited and unaccredited investors, thus appealing to a broader base of people with capital. The SEC oversight of a Reg A+ offering is much greater than a Regulation D or a Regulation CF. Therefore, the importance of Professional Legal Guidance and the significance of seeking competent legal counsel cannot be overstated when navigating Regulation A+ offerings.
Understanding Regulation A+ Offerings
Regulation A+ allows private companies to raise capital publicly through offerings of up to 75 million (USD) in any 12-month period. Historically, this has not been used by issuers very frequently, due to a cumbersome federal qualification process that was similar to the requirements of a full registered offering. As part of implementing the JOBS Act, the SEC amended Regulation A+ to address some of the limitations of such regulations.
Exploring the Benefits of Regulation A+ Offerings for Businesses
A comprehensive examination of the benefits of Regulation A+ offerings, includes expanded investor reach, cost-effectiveness, market testing opportunities, regulatory compliance, and enhanced brand visibility. Regulation A+ is known as “mini registration” because issuers must comply with a federal qualification process that, although less burdensome than the full federal registration, is still time-consuming and expensive. Regulation A+ also preempts state securities laws in certain situations.
1. Access to a Wider Investor Pool
Regulation A+ offerings enable businesses to attract a diverse range of investors. Often, issuers seek the use of a Regulation A+ because they can solicit people who might not otherwise be able to invest because they lack accredited investor status. These unaccredited investors are often users of the products or services that the issuer already provides to the general public, or they may be interested and familiar with the asset class, such as real estate.
2. Cost-Effectiveness Compared to IPOs
The comparison of the expenses associated with Regulation A+ offering to a traditional initial public offering (IPO) are vastly different. Small business owners may wonder how going public might even be possible, given the high fees charged by the larger legal and service firms. Often boutique securities law firms will help early-stage issuers with cost-effective legal work in drafting a Regulation A+ offering.
3. Ability to Test the Market
Regulation A+ allows issuers to solicit interest and communicate with potential investors both before and after an offering statement has been filed. This way, issuers can “test the waters” to assess whether there is investor interest in the offering before deciding to proceed with a Regulation A+ offering. Investors who are interested can indicate their interest in participating in the securities offering. However, issuers cannot accept offers to buy the securities, or money from investors, prior to the offering statement being qualified.
4. Regulatory Compliance and Transparency
Issuers will need to fully grasp the importance of adhering to regulatory requirements and maintaining transparency throughout the offering process. The complexity of a Regulation A+ offering warrants the issuer engages competent legal counsel, with a proven history of success in drafting compliant offerings.
5. Brand Visibility and Investor Confidence
A Regulation A+ offering can boost a company’s visibility and instill confidence in potential investors. As stated earlier, a loyal base of investors who are interested in helping the issuer succeed is typically one benefit of this increased visibility. Exposure of the brand and the potential for being part of the issuer’s success can attract a larger audience.
The Role of a Regulation A+ Attorney
A. Importance of Legal Counsel in Regulation A+ Offerings
An issuer cannot overlook the significance of legal guidance to navigate the complexities of Regulation A+ offerings. For example, Regulation A+ provides for two types of offerings – Tier 1 and Tier 2, the availability of which is based on the maximum offering amount sought, different disclosure requirements, and certain investment limitations. Fully understanding the differences between the two is a vital starting point that counsel will address.
B. Expertise and Experience of Regulation A+ Attorneys
The specialized knowledge and experience that Regulation A attorneys bring to the table is essential to a successful offering. Securities focused law firms, with regulatory defense experience, can be most effective in helping the issuer avoid litigation down the road. Not all attorneys drafting Regulation A+ have this type of experience.
C. Services Offered by Regulation A+ Attorneys
Some of the specific services provided by Regulation A+ attorneys are drafting offering documents, ensuring regulatory compliance, and advising issuers on strategic decisions. A few law firms that specialize in Regulation A+ Offerings, will also have strategic partnerships with other service providers in the Reg A+ ecosystem. Capital raising services such as a broker-dealer or on-line portal, marketing firms and transfer agents, all vetted for the issuer by the law firm.
Why You Need a Regulation A+ Attorney for Your Offering
A. Avoiding Legal Pitfalls and Compliance Risks
Experienced legal counsel can help businesses mitigate risks and ensure compliance with securities laws. The SEC commentary period and approval of a Regulation A+ offering extends the time until the issuer can start raising capital. Working with experienced counsel who has a history of drafting for SEC approval will be of value to the issuer.
B. Maximizing Opportunities and Investor Confidence
Regulation A+ attorneys are of great value in maximizing fundraising opportunities and instilling confidence in investors. A sophisticated investor will often take all the documentation they are given by the issuer and send it right off to their own attorney for review. Inexperienced work will be easily spotted, which can reduce the chances of gaining the confidence of the potential investor.
C. Ensuring a Smooth and Efficient Offering Process
Engaging with expert legal counsel plays a critical role in every stage of the offering process, from initial planning to post-offering compliance. Expertise and guidance are essential for navigating the complex legal and regulatory landscape surrounding securities offerings, ensuring that the process is executed smoothly and successfully.
D. Tailored Legal Strategies for Business Success
Regulation A+ attorneys develop customized legal strategies to align with the unique needs and goals of each business. This comes from working with a variety of issuers and is mastered over many years.
Case Studies and Success Stories
A. Real-Life Examples of Businesses Benefiting from Regulation A+ Offerings
Elio Motors, an automotive company, utilized Regulation A+ to raise funds for its innovative three-wheeled vehicle. Despite facing challenges in bringing its product to market, Elio Motors successfully completed its Regulation A+ offering and attracted significant investor interest. Fat Brands, a restaurant franchising company that owns popular brands like Fatburger and Buffalo’s Cafe, raised capital through Regulation A+ to fuel its expansion plans. The company’s use of Regulation A+ allowed it to tap into a wider pool of investors and access capital more efficiently.
B. Demonstrating the Role of Legal Counsel in Achieving Success
These are just a few examples of businesses that have leveraged Regulation A+ to raise capital and achieve their growth objectives. Regulation A+ attorneys guided these issuers and provided a viable alternative for companies seeking to access the public markets while benefiting from reduced regulatory requirements and expanded investor access.
Concluding the Discussion on Regulation A+ Offerings & the Importance of a Legal Aid
Regulation A+ attorneys play a crucial role throughout the offerings process with the various regulatory filings and ensuring that all compliance requirements are being met. All securities offerings, including Regulation A+, require specialized knowledge and expertise in securities law and regulatory compliance. Legal counsel with a track record of success in this area can provide valuable guidance and support tailored to the specific needs of your offering.
Note: We’re offering comprehensive crowdfunding consulting services along with Regulation A+ offerings that cover everything from campaign strategy to compliance with regulatory requirements.