What is Form D and what information gets publicly disclosed in a financing?
Takeaway: Form D is a filing often made by startups after fundraising so that they comply with federal securities laws. In general, if you sell shares, you need to either register those shares with the SEC or rely on an exemption. Filing a Form D avails companies of an exemption from this registration under Regulation D.
A Form D is a filing made by startups raising capital through private placements, such as venture capital financings. It is a notice of an exempt offering of securities filed with the U.S. Securities and Exchange Commission (SEC) under Regulation D of the Securities Act of 1933. In this post, we will discuss what Form D is and the information that gets publicly disclosed to the SEC when a company files Form D in connection with a financing.
Purpose of Form D
Form D serves as a notice to the SEC that a company is raising capital through a private placement, exempt from registration under Regulation D. This exemption allows startups and private companies to raise funds without the time-consuming and costly process of registering their securities with the SEC.
Key Information Disclosed in Form D
Form D requires disclosure of specific information about the company and the offering, including:
Issuer Information: The company's name, address, state of incorporation, fiscal year-end, and contact information are disclosed.
Principal Place of Business: The company's primary business location is provided.
Related Persons: Names and addresses of the company's executive officers, directors, and promoters are disclosed, along with their roles in the offering.
Offering Information: Key details about the offering are disclosed, such as the total offering amount, the amount of securities sold, the type of security being offered (e.g., equity, debt, or convertible securities), and the minimum investment amount accepted from any outside investor.
Sales Compensation: If any sales compensation is paid in connection with the offering, the company must disclose the recipients' names, addresses, and the amount of compensation.
Number of Investors: The company must disclose the number of investors who have already invested in the offering.
Exemption and Exclusion Information: The company must specify the exemption claimed under Regulation D and any other relevant information, such as whether the offering is made to accredited investors only.
Filing Process and Timing
Form D must be filed electronically with the SEC through the EDGAR system within 15 days of the first sale of securities in the offering. It is important to note that companies may also be required to file a similar notice with state securities regulators where the offering is made, depending on state laws.
Conclusion
Form D plays a crucial role in private placements and venture capital financings by providing a streamlined exemption from the registration process. It requires the disclosure of key information about the company, the offering, and the use of proceeds, ensuring transparency and regulatory compliance. By understanding the purpose and requirements of Form D, startups and private companies can navigate the fundraising process more effectively while adhering to SEC regulations.