Though private placement does not involve any kind of public issue, a private placement memorandum template is needed by businesses who want to offer investment opportunities to other people. There are many statutory compliances that are involved in the private placement program and in case of any intentional or unintentional mistake, legal action might be executed by governing bodies and the legal system.
The private placement programs are principally governed by the United States Federal Securities Act of 1933 and the compliance with regards to such placements have been stated in this Act. Apart from these compliance, under this act, you will also need to take a look at all security laws, registration requirements, and Rules 504, 505, and 506.
About Private Placements
Understanding private placement programs is more important, before we go on to view the template. There are two principal ways with the help of which companies and businesses can establish a capital, a public issue, and a private placement. The private placement is the exact opposite of the public issue. Such a program is initiated by the company and the securities are sold to people through the stock brokers and underwriters. Though the number of securities that are sold through the intermediaries such as underwriters and stock brokers, is smaller as compared to the public issue, the per security investment is very high. Private placement programs thus often operate on personal relations and of late, companies have started initiating such programs with greater frequencies due to their successful output.
In many cases, companies and business establishments prefer to raise their capital for small-scale expansion. In such a case, the securities are secured to the assets that are purchased during the expansion process. This makes the private placement program even more attractive, as the presence of security eliminates the possibility of loss. Apart from the security, the returns are periodic and are based upon profit-sharing concepts. The memorandum of a private placement is needed to state the return over investment of the program. This memorandum is exactly like the prospectus that is issued by the companies, save some small differences.
The following is a template and if you want to draft a memorandum as per compliance, you will probably need help from an attorney and a lawyer. This template is in a single sheet, but when you write out your own memorandum, it will be several sheets long. Also, please look out for all compulsory disclosures.
|Name and address of the company or business establishment along with the address and contact number
You may also include some extra details such as establishment and key people, a summary of the mission statement and the gist of memorandum and articles of association.
1. Cover Page
2. Summary of the Offering
3. Summary of Subscription Procedures
4. Risk Factors
5. Executive Summary
6. Business Plan
7. Use of Proceeds
8. Interest Holders
9. Capitalization Table
The last two attachments include:
As mentioned above, you might require help from some legal expert who would help you draft the memorandum. You can also take a look at some sample drafts to get a better idea.