The money on the table
How to ensure proper documentation during a private placement offering

Woodbridge corporate and securities lawyer, Joseph Chiummiento, of Core Lawyers, provides tips on using lawyers when raising capital through private placement offerings – or selling shares.

Many companies looking to grow or to take advantage of an opportunity will raise funds by selling securities such as shares or debt instruments to accredited investors and should ensure their paperwork is in order. Mishaps in documentation can delay the necessary approvals from regulatory authorities and even jeopardize the availability of money already on the table.

Securities laws

Securities laws are governed by each province independently, and, in some cases, the provinces have agreed across Canada to maintain certain rules and regulations known as multilateral instruments.  Navigating these requirements takes time, and knowing how they impact your plans can make a big difference in a company’s growth strategy.

Generally speaking, companies can raise funds by providing a prospectus to investors willing to purchase their shares through a going-public-process.  As an alternative, and with many legal caveats, an exemption to the requirement to provide a prospectus exists for companies selling their securities to accredited investors – investors that qualify under specific tests set out by the securities regulators in each province (ie. Ontario has the Ontario Securities Commission set the tests).
Pre-public and Early Stage Public Companies

Raising capital is important to growth and development of any pre-public or early stage public company.  With the onset of crowdfunding, the rules have gotten more complex, and in order to maintain public company status or to go public, your securities transaction must be in compliance with securities laws.  In many cases, annual audits by a regulator, listing exchange (like the TSX, TSXV or CSE) or broker (known as exempt market dealers) will find discrepancies or deficiencies in compliance for companies they represent such as:

• Record keeping
• OSC or related regulatory filings
• Incomplete subscription agreements failing to confirm proper accredited investor sign-offs were received.

Such deficiencies can slow or in the worst case even halt the raising money process and thus endanger the financial health of an early-stage public company.

Private Placement Lawyers Help you with Compliance

Lawyers can work with a CEO and CFO to be sure a proper records book is created for the company that maintains all important legal documents for each private placement financing.  Ensuring contracts are in order, legal opinions are prepared or received, and compliance is maintained for audit or regulatory purposes are important.

An effective working relationship with counsel should significantly reduce the risk of investigation, cease trades, litigation and embarrassing press releases.  Protecting your Board of Directors, your shareholders’ interests and management reputation are the kinds of things that good lawyering can help with, and having the confidence to know this is done will only help the CEO/CFO spend their time building and growing the business.

Please get in touch with me directly to discuss your situation.