A Offering Memorandum for a 506(c) offering is a disclosure document that is drafted by an issuing company and given to investors for their capital (hopefully). Our team has been involved in the preparation and writing of Offering Memorandum under Rule 506c business documents for since 506c were allowed to be offered. The most popular rule of 506c offering is the SEC exemption under Reg D for the use of general solicitation to solicit capital from qualified investors such as accredited investors without a prior history knowing the individual. We have helped thousands of companies – in all the world’s major business hubs – create their 506c offering documents. The importance of writing a Offering Memorandum, also referred to as an “OM” for short, can make the difference between getting funding and not being taken seriously by investors. Along with the business plan of the company an OM will guide the investor through the securities features of the offering, including the terms. The OM is essentially a long contract, the last part being the subscription agreement.
The offering memo will also discuss the management team and their skills, as well as the risk factors of the company. It is important to list the risk factors of the business so that investor can make an educated choice regarding investing. In addition, tax implications of the investor will also be discussed, as well as various rules and regulations involving foreign investment. The Offering Memorandum is an opportunity to tell the story of the company, its product and service offerings, the benefits to investors, long term payout and strategy and more. Giving a potential prospect an investor ready Offering Memorandum is good business practice and looks professional.
Offering Memorandum 506c
506c private placements different from 506b or general 506 private placements in that the general solicitation of investors is forbidden under 506b, while under 506c it is permitted with various other conditions.
Offering memorandum business document issued by companies typically issue either equity or debt, or a mixture of both.
Equity: Soliciting investment capital with a Offering Memorandum is common for corporations and funds, like hedge and mutual funds, both onshore and offshore. Selling equities implies that some form of company ownership is being sold to investors. This is almost certainly the case for publicly traded companies selling equities, but in a private placement normally shares of a corporation or units of an LLC are sold privately. Mutual funds and hedge funds also sell shares, but most often this does not grant voting rights like in a corporation. Regardless if the entity is fund or corporation or an LLC a Offering Memorandum is the standard document given to invest for investment consideration.
Debt: In a debt private placement offering, securities such as notes, bonds, convertible securities, debentures and others are sold to investors. The Offering Memorandum will outline the terms of the debt issuance and offer, giving such details as the interest rate, maturity date, payment dates, risk factors and vital information on the product, the management team and company goals.
Our staff specializes in structuring and writing Offering Memorandum offering documents for debt and equity issuance.
The usage and popularity of the term Offering Memorandum is understood worldwide to mean a document, referred to as a “memorandum”, which details what the company is “offering” in return for investment capital. Read it backwards and you get “memorandum placement private”, i.e. a document detailing the offering of securities via a private offering. In addition to the term Offering Memorandum the most popular word for such a document is a prospectus and an offering circular and a Offering Memorandum, as well a red herring and others are also employed.
The Offering Memorandum will usually contain the subscription agreement, which is the contract between the company selling securities and the investor who is buying them. The subscription agreement outlines the terms, and has numerous places for the investor to fill out and usually gives instruction where to send a check for subscribing to the securities, or bank wire details. The subscription agreement is of vital importance for any issuer, and the private placement documents should include it. The subscription agreement is vital for the Offering Memorandum as it is the remaining section of the document, that without an investor cannot give his capital.
Prospectus’ team of consultants and lawyers can help draft your 506c Offering Memorandum for either debt or equity issuance in an effective, fast and cost affordable way. Reach out to us any time or meet us in any of our offices worldwide for a free consultation.
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- Information Memorandum
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