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Private Placement Memorandum Template

Private Placement Memorandum Template

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.
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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
The cover page can include the introductory and objective of the private placement. The need for funds can be quickly described on this page.

2. Summary of the Offering
A summary of offering describes the need of capital, its purpose, the securities that the company is willing to issue in exchange of investment, power of investors, nature of investments, and finally the type of investments.

3. Summary of Subscription Procedures
There is a particular way or system that is followed by the companies, to issue the securities. The practical procedure of investing in the company, via appropriate payments, applications, and allocation of securities, is described in this summary.

4. Risk Factors
There are certain risks that are faced by every possible business, addressing this risk is an essential aspect of the business. The risk prevention mechanism, provisions, and its effect of profits and investment returns are to be described.

5. Executive Summary
The executive summary deals with the time needed for planning and the amount of workload that is to be executed within a stipulated time period. It is customary for companies to project the execution of work, profit based on this work, and the distribution of these profits, in the memorandum.

6. Business Plan
The business plan as the name suggests is the detailed elaboration of the economic activity that is taken up by the company.

7. Use of Proceeds
Often proceeds are reinvested by the company, disclosing the exact facts regarding reinvestment is an absolute necessity.

8. Interest Holders
By law it is mandatory for companies to disclose the interests of the highest investing parties in the memorandum.

9. Capitalization Table
The last aspect of the private placement memorandum is the table of capitalization. In this table, the projected returns of all the different capitalization is given. Apart from projection, there are several instances where the company promises a specific return over investment format, which is specified in this table.

The last two attachments include:
  • Subscription agreement
  • Certificate of accredited investor status

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.