A private placement memorandum is first and foremost a disclosure document.
The purpose of a PPM is to explain a new offering of securities by a Company and give full and complete disclosure to prospective investors about the business, its operations, risks, capitalization, management, governance, use of offering proceeds and financial information. It is used in connection with the solicitation of prospective investors in the Company.
Its contents are the responsibility of management and the board of directors or governing arm of the entity offering the securities. Federal and state securities laws also dictate its contents and method of distribution.
Although management and the board should obtain legal and financial advisors to assist in its preparation, it is imperative that they too also fully understand and agree with the disclosure contained in the PPM. Often times, executive management and directors will not thoughtfully and carefully review all the information contained in an offering document, which can expose them to future liability. Good faith and diligence goes a long way in insulating officers and directors from exposure.
Properly drafted offering materials are essential when seeking to take advantage of the vibrant and massive private placement market. Understanding the type of disclosure that is expected and material to investors is critical. Poorly drafted PPM’s reflect poorly on management and the Company, and is often the difference between a successful offering and a failed offering. Private placement memoranda, however, are not sales documents and should not be drafted as such.
It is not advisable to offer securities without the assistance of experienced professionals who can guide you through the private placement process. Boilerplate from templates is not sufficient to allow Company management to prepare a PPM and conduct an offering without such assistance.
The benefits of strengthening your balance sheet and providing growth capital to move to the next stage of development with a successful private placement could, however, be the difference in enabling a Company to create a competitive advantage and attain long-term superior performance.(source-http://bookkeepingpal.wordpress.com/2013/05/09/private-placement-memorandum/)
- Private Placements (bookkeepingpal.wordpress.com)
- The Book on PPM’s Series (Reg D Rule 504, Reg D Rule 505, Reg D Rule 506) (privateplacementmemorandumtemplate.wordpress.com)
- The Book on PPM’s Series (Reg D Rule 504, Reg D Rule 505, Reg D Rule 506) by James Scott (privateplacementmemorandumchecklist.wordpress.com)
- Maine Office of Securities Issues Investor Advisory on Private Placement Offerings (necontact.wordpress.com)
- Regulator proposes lessening disclosure burden for foreign private placements (business.financialpost.com)