When it comes to creating a private placement memorandum (PPM), it’s essential that the document is legally compliant and accurately reflects the unique circumstances of your company. While using a template to draft your own PPM may seem like a cost-effective solution, in reality, it can be a waste of time and money to have a law firm review a PPM that was drafted from a template, rather than hiring the law firm to custom draft it from the start. Let’s explore some of the reasons why this is the case.
PPMs Should Be Legally Compliant
First, it’s important to understand that a PPM is a legal document that must comply with a complex set of rules and regulations, including both federal and state securities laws. Moreover, securities laws vary from state to state and can be subject to interpretation. While a template may provide a basic structure for your PPM, it’s unlikely that it will be fully compliant with all of the relevant laws and regulations. A law firm specializing in securities law will have the expertise and knowledge necessary to ensure that your PPM is legally compliant, but if you have drafted the document using a template, it may take significant time and effort to get the document to the point of compliance, which can be both time consuming and costly. In fact, this strategy can often lead to double work as a lawyer must review the entirety of the template with which he is unfamiliar, and then take additional time to comment on any sections or provisions that have issues, and then on top of all of that take even more time and expense to fix all these issues. This unwinding and rewriting is often even more costly and time consuming than having a securities lawyer write the document from scratch.
Reviewing Leads To Wasteful Undoing
Secondly, using a template to draft your own PPM doesn’t take into account the unique circumstances of your company. Every business is different, and a one-size-fits-all template may not be appropriate for your specific situation. A law firm can work with you to tailor your PPM to your company’s needs, ensuring that it accurately reflects your business, its operations, and its financials. However, if you have already drafted a PPM from a template, it could be very difficult for a lawyer to undo the work and refactor it completely to meet your specific circumstances.
Furthermore, having a law firm review a PPM that was drafted from a template can be a waste of money as it might not address all of the issues that could arise. Since the PPM is meant to be a marketing document that should be tailored to your business, it is only logical that it should be done by the same people who will have the understanding of the business more than any other party.
Anything Less Than Stellar Can Turn Off Investors
Finally, it’s important to remember that the PPM is a crucial document when it comes to raising capital. It’s the first impression that potential investors will have of your company, and it’s essential that it is well-written, accurate, and legally compliant. A PPM that is poorly written or not legally compliant could deter potential investors from investing in your company, and could damage your company’s reputation. By having a law firm custom draft your PPM from the start, you can ensure that the document meets all legal requirements and accurately reflects your company, thus increasing the chances of attracting investors.
In conclusion, while using a template to draft your own PPM may seem like a cost-effective solution, in reality, it can be a waste of time and money to have a law firm review a PPM that was drafted from a template, rather than hiring the law firm to custom draft it from the start. Custom drafting a PPM by a law firm will ensure that the document is legally compliant, accurate, and tailored to your company’s specific needs, increasing your chances of attracting investors and ultimately saving you time and money in the long run.