What do “common law private placements” of corporate equity and pornography have in common? No one can define either, but people spend endless hours attempting to describe their characteristics.
Recent events have highlighted the confusion surrounding making a lawful private placement outside of the regulatory safe harbors of Rule 144A and Regulation D, although there continues to be a vigorous market for such transactions.
Here, we refer to non-safe-harbor placements as common law private placements.
First, the American Bar Association’s Business Law Section issued a report attempting to define the current law on making common law private placements (see “The Business Lawyer,” November 2010).
In January, Goldman Sachs proposed an investment vehicle to effect a large equity investment by numerous people on Facebook, similar to arrangements proposed for Twitter, both “non-public” companies. The commentary surrounding Goldman’s use of a single purpose entity to aggregate multiple investments centered around avoidance of ’34 Act registration. It also should have focused on the possible unavailability of an exemption from ’33 Act registration by reason of packaging large numbers of investors into a single entity. Practitioners regularly deal with the law and lore of common law private placements in everyday corporate life.
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