Requirement for Private Placement Memorandum

Document Sample
Requirement for Private Placement Memorandum Powered By Docstoc
					    Requirement for Private Placement Memorandum
A Private Placement Memorandum (PPM) is a standardized legal document that contains the relevant
background and financial information typically required to transfer private securities. As noted above,
investors must reasonably be able to protect their own interests, and must have accessible to them all
available information about an investment. The PPM includes an executive summary, risk factors, use of
proceeds, shares of the company, shareholders agreement, stock incentive plan, principal shareholders,
management and management compensation, method subscribing and how to subscribe, and additional
relevant information.

Perhaps most important, a PPM also includes the subscription agreement which is the actual sales
contract for purchasing the securities. This document includes the signature of the potential investor and
thereby commits them to the purchase of the securities. In this way a PPM is differentiated from a
business plan which is typically not considered an offering of securities. Business plans typically include
an executive summary, business concept, description of the business industry and venture, marketing
plan, corporate structure, risk assessment, action plan, financial plan and statements, financing and
capitalization, and references. PPMs and business plans have many similar components and often
business plans either make up a substantial portion of a PPM or are attached in their entirety as an
appendix. However, a PPM contains more relevant information for potential investors. A private
placement memorandum should typically always be sought if a company plans on offering private

A sample table of contents for a Private Placement Memorandum Includes:

Shared By: