Rule 506 of Regulation D (Reg d)
Rule 506 of Regulation D allows a company to raise an unlimited amount of capital, as long as the company satisfies the following standards for an exemption under this rule:
• The company can raise an unlimited amount of capital;
• The company does not use general solicitation or advertising to market the securities;
• The sale of the company’s securities can be to an unlimited number of accredited investors and select few other purchasers. Unlike Rule 505 of Regulation D, all non-accredited investors, either alone or with a purchaser representative, must be “sophisticated”. This means that they must have “sufficient” knowledge and “experience” in financial and business matters to make them capable of evaluating the merits and risks of the prospective investment;
• The company, i.e. the seller of the securities, must be available to answer questions by prospective purchasers;
• Financial statement requirements as for Rule 505; and
• Purchasers receive restricted securities, which may not be freely traded in the secondary market after the offering.
• And more.
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