Private Placement Memorandums
Explain the investment risks to your investors in plain English. After a 90 minute interview, our experienced team will draft your professional-grade Private Placement Memorandum, Subscription Agreement, and Operating Agreements, all of which comprise your offering package.
Who Needs a PPM?
A Private Placement Memorandum (PPM) serves as the disclosure document required by the Securities and Exchange Commission (SEC), under federal securities laws, when including non-accredited investors, although it is recommended for all Regulation D Offerings with more than just a few investors even if all of them are accredited investors.
When selling securities, you have an obligation to give investors all of the material facts they need to make informed consent. The PPM provides important information relative to an investor’s understanding of the securities being offered, the purpose of the Company, and the qualifications of the people involved in management. A well-drafted PPM can serve to shift the risk of loss from management to the investors.
Potential investors will look for relevant information in the PPM such as:
- Risks of the investment
- Structure of the company
- Who is on the management team and their prior experience (or lack thereof)
- Any conflicts of interest
- Projected Distributions to Investors
- Management fees, and carried interest (management profit share)
- A summary of how the Company will be operated, among other things
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Here’s How We Can Help You
Our experienced team will draft your professional-grade Private Placement Memorandum, Subscription Agreement, and Operating Agreements, all of which comprise your offering package.
Frequently Asked Questions
What is a Private Placement Memorandum?
A PPM is a 20-60 page document, depending on the complexity of your offering. Its primary purpose is to disclose the risks of the investment, so that all prospective investors are fully informed.
Is a private placement memorandum required?
A PPM is required when non-accredited investors are included in the offering under Regulation D Rule 506(b). If all investors are accredited investors, then a PPM is not required, but management is still obligated to provide all material facts to prospective investors. It can be more difficult to do this without a PPM.
How much does a Private Placement Memorandum cost?
A complete Regulation D offering package that includes a PPM typically ranges in price from $15,000 to $30,000 depending on how much money is being raised and the purpose of the offering. Lower prices are available for offerings with only accredited investors.
How do I create a Private Placement Memorandum?
An experienced corporate securities attorney should be hired to create a PPM. They can give the best advice on corporate structure such as what entities to use, where they should be formed, and whether they should be member-managed or manager-managed. Additionally, they can help you determine the best tax structure for you and your investors, and make sure that you disclose all the required risk factors. They can also help you do the required filings with the SEC and state securities agencies without missing important deadlines.
Who prepares a PPM?
It is best to hire a securities attorney who prepares Private Placement Memorandums on a regular basis; the more the better. Many attorneys only do securities offerings as a small part of their practice, perhaps only doing 2 or 3 a year. An attorney who has prepared 100s of securities offerings should be up to speed on best practices and current deal structuring trends.
Why do you need a PPM?
Without a PPM, it would be impossible to prove that you provided the investors with all material facts and risk factors associated with your offering. Later on if things go wrong, investors could argue that they wouldn’t have invested if they knew things could go wrong and that you didn’t fully inform them. You could be accused of fraud, and omitting material facts about yourself or the investment. You could be forced to give everybody’s money back (rescission) even years later after the investment was made. With a PPM, there is no question that you provided all the material facts, and risk factors associated with the offering. Your investors will sign a subscription agreement stating that they read the PPM and made their investing decision with a full understanding of the risks. Having a PPM shifts the risk of loss from you to the investors as long as one of the things you warned them about happens.