If you’re considering conducting a private placement to raise capital for your business, it’s important to understand the difference between Regulation D Rules 506(b) and 506(c) offerings. While both options allow you to sell securities to accredited investors, there are some key differences that you’ll need to consider.
Regulation D 506(b) offerings are the traditional option for private placements. They allow you to sell securities to an unlimited number of accredited investors and up to 35 non-accredited investors, provided that you meet certain requirements. One key requirement is that you must not use any general solicitation or advertising to promote the offering. This means that you can’t publicly advertise the offering or reach out to potential investors through channels like social media or email marketing.
On the other hand, Regulation D 506(c) offerings allow you to use general solicitation and advertising to promote the offering. This means that you can publicly advertise the offering and reach out to potential investors through channels like social media or email marketing. However, in order to qualify for a 506(c) offering, you must take reasonable steps to verify that all investors are accredited. This means that you’ll need to ask for information about an investor’s income, net worth, and investment experience, and you’ll need to review documentation to confirm their accredited status.
So which option is right for you? That will depend on your specific needs and goals. If you’re looking for a more traditional, low-key approach to private placements, a Regulation D 506(b) offering may be the way to go. However, if you’re looking to reach a wider pool of potential investors, a Regulation D 506(c) offering may be a better fit. It’s important to work with an experienced private placement attorney or law firm to determine the best option for your business.
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