Legal Question in Securities Law in Nebraska
Sell Private Corporation Stock to Public
I started a sole proproprietorship Company in 1989. My question is related to incorporating my company, issuing stock and selling stock to the public, to raise money for business expansion. I have several good business opportunities, but I need capital to make things happen. Is is leagal to sell stock from my private company to the public, if people are willign to buy my company stock?
2 Answers from Attorneys
Re: Sell Private Corporation Stock to Public
Yes, essentially what you have in mind is done frequently. There are many rules and regulations that come into play. You will have to offer and sell you shares to private individuals. YOU CANNOT MAKE A GENERAL SOLICITATION. For example, you are prohibited from placing an advertisement in a newspaper. Your offer and sales of shares must be in the form of a "private placement". This is my area of expertise. I draft disclosure materials for private placement offerings for small oil and gas corporations primarily in Texas.
This is a highly complex area of the law. Basically, to summarize you will need to have a disclosure document prepared in conjunction with your private offering. Only Broker Dealers who are licensed through the NASD can sell the shares but there is a loophole for private offerings such as yours. An officer (President or Board of Director) of the corporation can sell shares of its own company. I assume you are the chief officer of this corporation so you are clear to sell your own shares. However, you cannot generally solicit and you can only sell shares to 35 or less investors who are classified as "unaccredited". The Securities and Exchange Commission has established rules defining "unaccredited" investors and "accredited" investors.
Again, this area of the law can be challenging. I have really just given you a simplistic overview. Please contact me to discuss this in greater detail at (800) 303-0720
Re: Sell Private Corporation Stock to Public
The short answer is yes.
A more complete answer is that wherever you intend for your company to be incorporated, you should check state/provincial laws governing private offerings of securities in private, unlisted companies to ensure that there are no such restrictions. Most jurisdictions have detailed legislation restricting the public sale or advertising of securities.
Also, you should ensure that the company's bye-laws/articles of association provide for such offerings.
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