Regulation D 506(c) is a set of rules set forth by the Securities and Exchange Commission (SEC) that allows companies to raise capital through the sale of securities without registering the securities with the SEC. Similar to Regulation D 506(b), this type of offering, known as a private placement, is typically used by small and startup companies that do not want to go through the time-consuming and costly process of registering with the SEC.
The main difference between Regulation D 506(b) and 506(c) offerings is the type of investor that a company can accept. Under Regulation D 506(b), companies can raise an unlimited amount of capital from an unlimited number of accredited investors, and up to 35 non-accredited investors. However, under Regulation D 506(c), companies can only raise capital from accredited investors.
The other main difference is that companies can advertise and solicit the investors for Regulation D 506(c) offerings. This allows companies to reach a larger pool of potential investors, which can make it easier to raise capital. Additionally, the SEC will not review the offering documents, and so there is less regulatory burden on the company.
However, there are also some significant limitations to Regulation D 506(c) offerings. For instance, companies can only accept investment from accredited investors and must verify their accreditation status before accepting their investment. There are also strict disclosure requirements, which require companies to provide detailed financial and other information to investors, and file Form D, a notice of sales, with the SEC within 15 days after the first sale of securities in the offering.
Regulation D 506(c) allows companies to raise capital through private placement without registering the securities with the SEC. It’s a cost-effective and efficient way for small and startup companies to raise capital, and allows companies to advertise and solicit investors. However, the offering is limited to accredited investors only, and there are stringent disclosure and filing requirements that companies must adhere to. It’s important for any company considering this type of offering to seek legal and financial advice before proceeding.
At Brashears Law Group PLLC we help LLCs with their legal needs and business goals, and assist with 506(c) private offerings for a variety of industries. We are here to assist with your business with a Regulation D 506(c) offering today.
Contact us today to discuss your Regulation D 506(c) offering.