When “All” Doesn’t Necessarily Mean “All”

more+
less-

In Who Can’t Raise Capital?: The Scylla and Charybdis of Capital Formation, 102 Ky. L.J. 1 (2013-2014), Duke University Professor James D. Cox tackles the widespread criticism of state blue sky laws as barriers to capital formation.  Along the way, he critique’s California’s limited offering exemption (Corp. Code § 25102(f)) as follows:

It is ironic, if not paradoxical, that the hotbed of entrepreneurism, and one of the most resilient economies during the financial crisis, California, is among the most restrictive states in the scope of its exemptions. California limits the exemption to thirty–five persons (including those outside of California) and bars general solicitation and advertisements in connection with the offering.  What makes this California exemption restrictive is that each of the purchasers either must enjoy a personal relationship with the issuer or be reasonably assumed to have the capacity to protect his own interest in the transaction.  Thus, unlike Massachusetts or Texas, the exemption does not afford a means for the issuer to distribute any part of its offering to the residual class of investors.

102 Ky. L.J. at 10 (footnotes omitted).  While it is true that California’s statute refers to ”all purchasers,” the phrase “all purchasers” doesn’t really mean all purchasers.  Rule 260.102.12(d)(2) provides that the phrase does not include purchasers excluded from the 35-person count either by virtue of Section 25102(f)(4) or Rule 260.102.13.  Thus, the statute is not as restrictive as it may seem.

Professor Cox also doesn’t mention the exemption in Section 25102(n) which dovetails with the federal exemption in Regulation CE.  That exemption does permit a limited general announcement.  See California’s General Announcement Exemption.

 

 

Written by:

Published In:

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Allen Matkins Leck Gamble Mallory & Natsis LLP | Attorney Advertising

Don't miss a thing! Build a custom news brief:

Read fresh new writing on compliance, cybersecurity, Dodd-Frank, whistleblowers, social media, hiring & firing, patent reform, the NLRB, Obamacare, the SEC…

…or whatever matters the most to you. Follow authors, firms, and topics on JD Supra.

Create your news brief now - it's free and easy »

All the intelligence you need, in one easy email:

Great! Your first step to building an email digest of JD Supra authors and topics. Log in with LinkedIn so we can start sending your digest...

Sign up for your custom alerts now, using LinkedIn ›

* With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name.
×
Loading...
×