| name | private-placement-memorandum |
| description | Drafts U.S. Regulation D Private Placement Memoranda (PPMs) with required legends, risk factors, capitalization, securities terms, and subscription procedures. Trigger when drafting a PPM, preparing a Reg D (506(b) or 506(c)) offering, building accredited-investor disclosure, or structuring private placement documents to minimize 10b-5 liability. |
| tags | ["corporate","drafting","memo","regulatory","transactional"] |
Private Placement Memorandum (PPM)
Draft a Regulation D-compliant PPM delivering full-and-fair disclosure with a defensible liability record.
Quick Start
Collect before drafting:
- Issuer profile — legal name, formation state/date, addresses, prior names/reorgs.
- Offering terms — security type, price/valuation, min/max raise, use of proceeds, timeline, escrow.
- Cap table — authorized/outstanding classes, options/warrants/convertibles, major holders.
- Financials — historical statements, burn, runway, audit status.
- Business materials — deck, plan, key contracts, IP, regulatory posture.
- Management bios — roles, tenure, relevant history.
- Compliance inputs — 506(b) vs 506(c), investor eligibility plan, blue sky scope.
Core Workflow
1. Determine Exemption
| Factor | 506(b) | 506(c) |
|---|
| General solicitation | Prohibited | Permitted |
| Investors | Accredited + ≤35 sophisticated non-accredited | Accredited only |
| Verification | Reasonable belief | Reasonable steps to verify |
| Disclosure | Enhanced if non-accredited present | Accredited-only package |
Record the exemption choice and its disclosure implications in the PPM.
2. Intake & Gap Log
Audit available documents against required inputs:
- Governing docs (charter, bylaws/operating agreement, investor rights, ROFR/co-sale)
- Security terms (dividend/interest, liquidation, conversion, voting, protective provisions)
- Material contracts (top customers/suppliers, IP licenses, debt)
- Litigation/regulatory (claims, investigations, sanctions)
- Financials (last 2–3 years or since inception; audited vs unaudited)
Track gaps in a single table:
| Section | Missing Data | Source | Owner | Deadline |
|---|
3. Cover Page + Legends
Required elements:
- Issuer name, security type, max amount, date
- Confidentiality legend — restrict distribution; require return/destroy
- Securities legend — not registered under the 1933 Act or state laws; offered under exemptions; no government approval
- Transfer restrictions — restricted securities; no public market; must hold indefinitely
4. Executive Summary
Structured fields: issuer identity and state, offering terms (security, valuation, min/max, closings, escrow), key investor rights (dividend, liquidation preference, conversion, voting), top 3–5 use-of-proceeds categories with percentages, 3–5 highest-impact risks, investor eligibility and verification approach.
5. Risk Factors
Minimum categories — each with bold heading and 2–5 sentences (what, why material, consequence):
- Financial/capital (losses, burn, dilution)
- Business/market (adoption, competition, market assumptions)
- Regulatory/compliance (licensing, investigations)
- Technology/IP (development risk, obsolescence, disputes)
- Key personnel (dependence, recruiting)
- Customer/supplier concentration
- Securities-specific (illiquidity, transfer limits, no dividends, management discretion)
6. Use of Proceeds
| Category | Min Raise | Max Raise | Description |
|---|
| Product/Engineering | $ | $ | Milestones, hires, infra |
| Sales/Marketing | $ | $ | Channels, headcount |
| Working Capital | $ | $ | Ops, inventory, receivables |
| Debt Repayment | $ | $ | Lender, rate, maturity |
| Fees/Offering Costs | $ | $ | Legal, accounting, escrow |
Include discretion disclaimer and conditional allocations if max not reached.
7. Business Description
Cover: company history/milestones, products/services and roadmap, market size and customer profile, competitive landscape, go-to-market, operations/supply chain, regulatory framework, intellectual property.
8. Management & Board
| Name | Role | Tenure | Relevant Experience | Education | Equity/Comp |
|---|
9. Capitalization
Provide pre-offering cap table, post-offering cap table (min and max scenarios), fully diluted schedule, and notes on options/warrants/convertibles with conversion assumptions.
10. Securities Terms
Term-sheet format covering: dividends/interest, liquidation preference (multiple, participation, deemed liquidation events), conversion (ratio, adjustments, auto-triggers), voting/protective provisions, redemption, transfer restrictions (ROFR, co-sale, lock-ups, legends), registration rights, preemptive rights, information and board rights.
11. Distribution & Subscription
- Direct vs placement agent; fees
- Offering timeline, closings, escrow terms
- Form D filing within 15 days of first sale [VERIFY]
- State blue sky notice filings and timing [VERIFY]
- Subscription steps: (1) review PPM + exhibits → (2) execute subscription agreement + questionnaire → (3) accredited verification if 506(c) → (4) wire funds → (5) acceptance notice and issuance
12. Legal Matters & Disclaimers
Counsel and accountant identification, audit status disclaimer, forward-looking statements cautionary language, no-update obligation.
13. Investor Qualifications
- Accredited investor definition with current thresholds [VERIFY]
- Net worth test excludes primary residence [VERIFY]
- Sophistication and illiquidity warning
- Company discretion to reject subscriptions
Final QA Checklist
Pitfalls
- No puffery — neutral language only; no unsupported projections or absolute guarantees.
- Tailor risks — issuer-specific; never use generic boilerplate lists.
- Gap discipline — every missing item goes in the Gap Log; do not draft around holes.
- Blue sky variance — confirm state-specific notice filing requirements and deadlines.
- Mark uncertainties — tag any unconfirmed citations or thresholds with
[VERIFY].
