Regulation D is a government program created under the Securities Act of 1933, instituted in 1982, that allows companies the ability to raise capital though the sale of equity or debt securities. The programs were designed to provide two main things – an exemption to sell securities in a private transaction without registering the securities and the appropriate structure and documentation for doing so properly. Regulation D Offerings are the practical method companies use to raise capital from individual investors.
Every privately-held company that is seeking to raise equity capital from investors should properly comply with State and Federal guidelines prior to having a securities offering in place.
If your transaction will only involve one or two investors – you will still need to provide the proper transaction structure, disclosure documentation and investment agreements necessary for raising capital. Raising capital from investors in the form of equity in your new company, of any amount requires very specific documentation in addition to what is already disclosed in your business plan. It is imperative that a company seeking capital from investors have in place a Private Placement Memorandum and a Subscription Agreement. Raising capital without these documents is nearly impossible – they are a necessity.
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