Amendments to Offerings by Bruce E. Methven

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 What does a company do if it has started an offering and then finds that it needs to significantly alter the information provided to investors or change the terms of the offering?  Those changes call for action regarding two groups, the securities regulators and the investors. 

 With respect to the securities regulators, much depends on whether the offering is using registration or an exemption from registration.  Registrations require prior approval from a regulator and include things like a federal S-1 offering or a state qualification by permit.  Exemptions, for example a federal Rule 506 offering, do not require approval but do require that forms be filed with the regulator(s). 

 If the offering is registered, generally the amendment first must be presented to the securities regulator for approval. 

 If the offering is using an exemption from registration, frequently nothing needs to be done unless the change affects information on any forms that have been filed.  In that case an amended form needs to be submitted.  With a Rule 506 offering, for example, Form D must be filed with the SEC.  If the change to the offering requires changes in the prior information provided on Form D, an amended Form D must be filed.  No approval is needed from the regulator, though; all that has to be done is make the filing. 

 Investors are another matter.  If there are updates or material changes to an offering, the private placement memorandum (aka the offering circular or prospectus) should be amended or revised — at least for those who have not yet invested. 

 For those who have already invested, if there are changes that negatively affect a prior investor’s rights or there is information that should have been disclosed previously (versus new information), often the best approach is to make the new disclosures to the prior investors and give them an opportunity to withdraw their investment if they wish.  Assuming a prior investor wishes to stay despite the changes, something in writing signed by that investor should be obtained. 

 On the other hand, if the changes positively affect prior investors’ rights (or are neutral) and do not constitute information that was required to be disclosed originally (perhaps because those events had not yet taken place), there likely is no legal requirement that they be informed, much less that their additional consent be obtained.  Still, it is always good practice to keep investors current regarding developments with the offeror, so in most cases the changes are presented to the prior investors in the form of a letter or an email.   

 Bruce E. Methven



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Bruce E. Methven, 2232 Sixth Street Berkeley, CA 94710
Phone: (510) 649-4019; Fax: (510) 649-4024
Copyright 2013 Bruce E. Methven, All Rights Reserved.

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