Tag: Shareholder Management

How Do I Build a Community for My Company?

Posted on by Oscar Jofre

What is a community? The word can be defined as “a body of persons of common and especially professional interests scattered through a larger society” or “a group of people with a common characteristic or interest living together within a larger society.” Putting this into a bit more context, picture a beaver in the forest, building a dam. This seemingly simple, instinctual event has a profound effect on the surrounding area. The dam forms a pond, which creates the perfect habitat for a diverse range of animals, insects, and other organisms, while also improving the water conditions. 

 

This beaver is much like an entrepreneur building a business. As the business grows, it provides employment opportunities, creates a network of suppliers and partners, develops relationships with customers, and is supported by shareholders. They all play a crucial role in the success of your business. 

 

By nurturing these relationships, especially in today’s highly competitive business environment, this community can help increase engagement, loyalty, and interest in your company, which can translate into more investment and business opportunities down the road.

 

Recognizing the Benefits of a Strong Community

 

From customers to employees and suppliers, building a community around your company can bring numerous benefits. A thriving and engaging community can create:

 

  • Increased customer or employee loyalty: When customers and employees feel a sense of belonging and loyalty to your brand, they are more likely to remain loyal for longer. This can result in higher rates of retention, as well as increased referrals and advocacy.
  • Improved engagement with stakeholders: A thriving community can help you engage with key stakeholders such as investors, partners, and suppliers. This can help to foster stronger relationships over time, leading to better deals and collaborations.
  • Increased brand reputation: A community of loyal customers or employees can promote your brand integrity and trustworthiness, which is essential for building a successful business.
  • More growth opportunities: With a strong network of loyal loyal customers and employees, you’ll have a larger pool of potential buyers or investors when you are looking to grow.
  • A foundation for investors: Ultimately, when you’re looking to raise capital or attract investors, having a strong community of engaged stakeholders around your company can be an invaluable asset by providing evidence of your brand’s trustworthiness and potential. These stakeholders can also become valuable investors that share in your vision for the future.

 

Ultimately, cultivating this community requires transparency and compliance to build trust and instill confidence. But how do you go about building a community for your company? 

 

6 Tips for Building a Community

 

1. Understand Your Audience

 

The first step in building a community is to understand your audience. Who are the people you want to attract and engage with? What are their needs, wants, and interests? What motivates them to invest in your company? By creating customer personas and conducting market research, you can get a better understanding of your target audience. This can help you tailor your messaging, content, and engagement strategies to better resonate with your community.

 

2. Focus on Transparency and Communication

 

Transparency and open communication are essential ingredients for building a strong community. Shareholders, employees, and customers all want to feel like they have a voice and that their concerns are being heard. This is especially important when it comes to managing shareholder relationships. To build trust and transparency, consider implementing regular communication channels like newsletters, social media updates, and webinars. Make a point of responding to customer and shareholder feedback promptly and thoroughly.

 

3. Leverage Technology

 

Technology can be a powerful tool in building and managing your community. Consider investing in a customer relationship management (CRM) system to track and manage your customer interactions. This can help you identify patterns and trends in customer behavior, enabling you to tailor your messaging and engagement strategies to better resonate with your community.

Social media platforms like LinkedIn, Facebook, and Twitter can also be powerful tools for building and engaging with your community. Regularly update your social media channels with relevant content, respond to customer feedback and comments, and use social media analytics to track engagement and identify opportunities to better connect with your community.

 

4. Create Meaningful Content

 

Creating high-quality, engaging content is another key element in building a community. Content can come in many different forms, including blog posts, videos, webinars, eBooks, and more. The key is to create content that is tailored specifically to your target audience and resonates with them on an emotional level. This will help you build relationships and foster loyalty among your customers, employees, and shareholders.

 

5. Foster and Incentivize Engagement

 

Engaging your community is an important part of building relationships and developing loyalty. Consider running contests, giveaways, or other promotional activities to incentivize engagement. You can also create loyalty programs or rewards systems to further reward customer engagement.

 

6. Gather Around a Cause

 

When building a strong community creates a sense of purpose around your company. Find something that your customers, employees, and shareholders can all rally behind. This should be something bigger than just making money – it could be related to sustainability, philanthropy, or another cause the community can get behind. By giving people something to believe in, you can create a sense of shared identity that will bring your community together. 

 

When it comes to raising capital, you should also focus on creating experiences that make investors feel appreciated and valued. For example, you could offer exclusive investor-only events or create a private investment platform where invited investors can access exclusive content about your company and its opportunities. 

 

Regardless of how you approach it, building a thriving community around your business is essential to growing and scaling effectively. This will lead to increased loyalty, greater investment opportunities, and higher long-term returns. By taking these key steps to develop a strong community around your business, you’ll be well on your way to achieving your capital-raising goals.

 

How Do I Know if My Cap Table is Ready?

Posted on by Oscar Jofre

A cap table (short for capitalization table) is essential for any company looking to raise capital. It provides a detailed breakdown of the equity owned by shareholders, enabling founders to understand how their offerings will be impacted and make sound decisions regarding their finances. When properly managed, cap tables help potential investors feel confident in their investments as they provide a clear picture of the company’s ownership. As such, understanding your cap table and ensuring it is up to date is important when assessing if your company is ready to move forward with fundraising efforts.

 

Must-Haves for Proper Cap Table Management

 

When it comes to cap table management, remember to include this elements:

 

  • Voting rights
  • Share issuance
  • Past and current shareholders
  • List any future projections for additional capital raises or dilution
  • Track all options grants, vesting schedules, and related information
  • The amount of money each shareholder has invested in the company
  • Include details about convertible notes, warrants, and other debt instruments
  • Clearly list all shareholders, their ownership percentages, and the date of their investments

 

All of the above must be taken into consideration and recorded accurately to ensure proper cap table management. With these basics accounted for, founders can feel confident that their cap table contains the necessary information so they can be ready to raise capital. Still, some dos and don’ts should also be observed to ensure the best possible outcome for organizations raising capital.

 

Cap Table Dos: 

 

  • Ensure that all information is readily available in an easy-to-understand way
  • Maintain accurate and up-to-date information
  • Take into account dilution from future funding rounds, options pools, and performance issues

 

Cap Table Don’ts 

 

  • Overlooking the potential for dilution when raising capital
  • Failing to update it when new shareholders invest
  • Hesitating to consult a legal or financial advisor with any questions that arise
  • Neglecting the importance of understanding the cap table and its implications

 

By following these dos and don’ts, organizations can avoid potential pitfalls in the capital raising process and ensure an efficient, effective raise for all involved parties. A well-maintained cap table ensures transparency between investors, founders, and shareholders.

 

Best Practices for Managing a Cap Table

 

Though having a comprehensive cap table is vital, keeping it updated and organized requires consistent effort. To ensure your cap table remains accurate, it’s essential to follow the best practices for managing a cap table, including:

 

  • Updating the tables regularly as new investments come in or out
  • Keeping multiple copies of the tables in both digital and physical form
  • Storing the cap table in a secure location with proper backups for redundancy
  • Utilizing a FINRA broker-deal with knowledge of and experience handling cap tables for JOBS Act raises
  • Monitoring new regulations and laws to ensure the cap table is compliant with all applicable standards

 

By following these best practices for managing a cap table, companies can ensure accuracy, transparency, and compliance when looking to benefit from raising capital. It will also give investors confidence that they have all the information they need to make informed decisions.

Best Practices for Shareholder Management

Posted on by Oscar Jofre

Shareholder management is a critical part of any company, but it can be especially daunting for those who have recently completed a RegA+ or RegCF offering. When you welcome so many new shareholders on board, it’s important to have a plan in place for how you will manage them to ensure a positive relationship. Thankfully, shareholder management can be streamlined with the right tools and communication strategy.

 

Shareholders have a vested interest in how your company performs. They will want to know about the company’s progress, financial information, or future plans, and they have a right to be kept in the loop. Unhappy shareholders may spread negative word-of-mouth about your company, which could hamper your ability to raise additional funds in the future. Additionally, if shareholders feel like they are in the dark about what’s going on with your company, they may choose to sell their shares, which could hurt your stock price. Thus, it is important to have a shareholder management plan in place to ensure that you are maintaining strong relationships with your shareholders. So, what does this look like in practice?

 

Continuous Improvement

 

A company’s first step should be to accurately evaluate its investor relations performance, with the analysis serving as a benchmark. While share price, analyst ratings, and price-to-earnings ratios provide some measure of a company’s ability to meet shareholder needs, they don’t provide much information about other dimensions of the investor relations function, such as the cost of operating the investor relations department or the quality of investor relations communication channels. It is important to establish an objective assessment of such things because ongoing monitoring of these metrics and the overall investor relations strategy can help to identify areas for improvement

 

Regular Communication

 

One of the most important things you can do to manage shareholders is to maintain regular communication with them. This can be done in many ways, such as through email, webinars, podcasts, or blogs. No matter what method you choose, it’s important to keep shareholders updated on your progress and answer any questions they might have. This will show them that you value their investment and are committed to keeping them informed.

 

Use Shareholder Management Tools

 

Another important tip for shareholder management is to use shareholder management tools, such as the shareholder management solution from KoreConX. This platform provides many features and benefits, such as the ability to keep shareholder documents like earnings reports secure and engage shareholders with portfolio management tools that allow them to see detailed information about their investments. Such tools eliminate the hassle of traditional mail and increase the ease of access for shareholders

 

Establish Expectations

 

When welcoming new shareholders on board, it’s important to set expectations from the start. Shareholders should know what kind of communication they can expect from the company and how often they will receive updates. It’s also important to let shareholders know what information will be shared with them and what will remain confidential. By setting clear expectations from the beginning, you can avoid misunderstandings and build trust with shareholders.

 

Seek Feedback

 

Another important tip for shareholder management is to seek feedback from shareholders regularly. This can be done through surveys, focus groups, or one-on-one interviews. Shareholders will appreciate being asked for their opinions and it can help you identify any areas where you need to improve your communication or management strategy. Feedback from shareholders may also be a great source of ideas for marketing, new or improved products, or other recommendations that will positively affect your business.

 

Be Transparent

 

Finally, it’s important to be transparent with shareholders about the company’s progress, financial information, and future plans. It’s easy to communicate good news, but a transparent company will ensure even the bad news is accurately conveyed to investors in a timely manner. Shareholders need to have confidence in your company–you don’t get that by denying the existence of problems, but by showing that you are proactive in (ideally) preventing them, identifying them, and solving or mitigating them. In some cases, it might make some sense to put on a rosy public face to the public but shareholders aren’t outsiders; they’re owners. This will show them that you’re committed to keeping them informed and help build trust between the company and its shareholders.

 

By following these tips, you can streamline shareholder management and build strong relationships with shareholders. With the right tools and communication strategy in place, you can ensure that shareholders are kept up-to-date on your progress and that their expectations are managed effectively. As a result, everyone remains on the same page, which can lead to a more efficient and cohesive shareholder management strategy, improve shareholder relations, and lead to a more successful enterprise.

 

4 Ways to Build Better Shareholder Relationships

Posted on by Oscar Jofre

As a business owner, you know that communication is key to success. But when it comes to shareholders, shareholder communications can sometimes take a backseat. They’ve already invested, so customer communications to generate revenue often steal the show. However, it’s essential to keep shareholders in the loop since they own a piece of the company and are entitled to know what you’re doing with it. After all, the more involved they are, the more willing and able they will be to help, reinvest, or promote the brand. So how can you build strong relationships with your shareholders? While email has been the go-to method for shareholder communication in the past, other options may be more effective in building relationships with your shareholders. Here are four ways to enhance the way you communicate with shareholders, and a good communication strategy will make use of several of these strategies.

 

1. Webinars

Webinars are a great way to connect with shareholders and provide them with valuable information about your company. You can use webinars to give updates on your progress, share financial information, and answer questions from shareholders. Plus, webinars allow shareholders to get to know you and your team better and help put a face to the company. Since webinars can feel like you’re talking with rather than just to your audience, they can help build a powerful connection and establish trust, as well as give you valuable feedback from people who care about the company.

 

2. LinkedIn Page

Having an updated and informative LinkedIn page is a great way to connect with shareholders online. Use your page to share company updates, industry news, and other relevant information that shareholders might find useful. You can also use your LinkedIn page to answer shareholder questions and build relationships with them. By maintaining an active presence on LinkedIn, you can show shareholders that you’re committed to keeping them updated on your company. By providing value on your LinkedIn page, you can also attract new shareholders who may be interested in investing in your company.

 

3. Podcasts

Podcasts are a great way to share detailed information about your company with shareholders. You can use podcasts to give updates on your progress, share financial information, and answer questions from shareholders. By providing valuable information in your podcasts, you become an industry influencer by providing this information and can more easily build trust with shareholders that are listening. You can also interview other industry leaders whose thoughtful insights into your industry your audience may find informative.

 

4. Shareholder Management Tools

After your successful RegA+ or RegCF offering, you can anticipate many new shareholders to welcome on board. As shareholders, they have a vested interest in how your company performs. Thankfully, shareholder management is streamlined when you eliminate Excel sheets, CRM, or email. The Shareholder Management solution from KoreConX sets the new standard, empowering you and shareholders with transparency, compliance, and confidence. Keep shareholder documents secure and engage shareholders with portfolio management tools that allow them to see detailed information about their investments. To learn about the many great features of the KoreConX platform, get in touch with our team for a demo or any additional information. 

 

The most important thing you can do to build relationships with shareholders is to maintain communication with them. Whether you’re using email, webinars, podcasts, or blogs, make sure to keep shareholders updated on your progress and answer any questions they might have. By maintaining regular communication with shareholders, you can show them that you’re committed to keeping them informed and building trust with them.

What are the Benefits of Digital Securities for Issuers and Investors?

Posted on by Oscar Jofre

With the emergence and development of blockchain technology, digital securities have seen wider adoption by investors and investment firms. Arising from the need for protection against fraud and as a way for investors to ensure asset ownership, digital securities are a digital representation of traditional securities and follow the same regulatory rules. Since their first appearance, digital securities have come to represent any debt, equity, or asset that is registered and transferred electronically using blockchain technology. 

 

Digital securities are made possible by blockchain, also known as “distributed ledger technology”. Distributed ledger technology is a database where transactions are continually appended and verified across by multiple participants, ensuring that each transaction has a “witness” to validate its legitimacy. By the nature of the system, it is more difficult for hackers to manipulate, as copies of the ledger are decentralized or located across multiple different locations. Changes to one copy would be impossible, as the others would recognize it as invalid.

 

Distributed ledger technology allows digital securities to be incredibly secure. Ownership is easily recorded and verified through the distributed ledger, a huge benefit over traditional securities. Any transfer of digital securities is also recorded and with each copy of the transaction stored separately, multiple witnesses of the transaction exist to corroborate it. 

 

With traditional securities, investors can lose their certificate of ownership or companies can delete key files detailing who their investors are. Without a certificate, proving how many shares an investor owns would be incredibly challenging. In contrast, digital security ownership is immutable. Investors are protected by always being able to prove their ownership since the record cannot be deleted or altered by anyone. Additionally, investors can view all information that is related to the shares they’ve purchased, such as their voting rights and their ability to share and manage their portfolios with both accuracy and confidence. 

 

Since the record is unchangeable, it also serves as a risk management mechanism for companies, as the risk of a faulty or fraudulent transaction occurring is removed. Digital securities are also greatly beneficial to the company when preparing for any capital activity since the company’s records are transparent and readily available. With traditional securities, the company would typically hire an advisor to review all company documents. If the company has issued digital securities, this cost is eliminated, as it is already in an immutable form.  

 

Also making digital securities possible are smart contracts that eliminate manual paperwork, creating an automated system on which digital securities can be managed. Integrated into the securities is the smart contract, which has preprogrammed protocols for the exchange of digital securities. Without the time-consuming paper process, companies can utilize digital securities to raise funds from a larger pool of investors, such as the case with crowdfunding. Rather than keeping manual records of each transaction, the smart contract automatically tracks and calculates funds and distributes securities to investors. 

 

Companies that are looking to provide their investors with the ability to trade digital securities must be aware that they are required to follow the same rules set by the SEC for the sale and exchange of traditional securities such as registering the offering with the SEC. This ensures that potential investors are provided with information compliant with securities regulation worldwide. According to the SEC, investors must receive ongoing disclosures from the issuer so they can make informed decisions regarding ownership of their securities. Companies that are not compliant with the SEC can face severe penalties and may be required to reimburse investors who purchased the unregistered offerings. 

 

Besides the companies offering securities, broker-dealers must also register with the Financial Industry Regulatory Authority (FINRA). Similarly, platforms on which digital securities can be traded must register as an Alternative Trading System operator with the SEC. Both broker-dealers and ATS operators can face severe penalties if not properly registered. 

 

Possibly the greatest benefit of digital securities is that it allows for smoother secondary market transactions. With records of ownership clear and unchangeable, an investor can easily bring their shares to a secondary market. Transactions are more efficient and parties have easy access to all necessary information regarding the securities being traded, removing the friction that is typically seen with traditional securities. 

 

At KoreConX, the KoreChain platform is a fully permissioned blockchain, allowing for companies to issue fully compliant digital securities. Records are updated in real-time as transactions occur, eliminating errors that would occur when transferring information from another source. The platform securely manages transactions, providing investors with support and portfolio management capabilities. Additionally, the KoreChain is not tied to cryptocurrencies, so it is a less attractive target for potential crypto thieves. KoreChain allows companies to manage their offerings and company data with the highest level of accuracy and transparency.

 

Since digital securities face the same regulatory rules as traditional ones, investors are protected by the SEC against fraudulent offerings. This, together with the security and transparency that blockchain technology allows, creates a form of investment that is better for investors and issuers alike. Since the process is simplified and errors are decreased without redundant paperwork, issuers have the potential to raise capital more efficiently. They will also be better prepared for future capital activity. For investors, a more secure form of security protects them from potential fraud and losses on their investments. With digital securities still in their infancy, it will be exciting to see how this method of investment changes the industry. 

What is a Company’s Duty to its Shareholders?

Posted on by Oscar Jofre

For many companies, raising capital often marks a major milestone. With increased sources of capital, the company can grow, hire new employees, and develop new products that can leave a lasting impact on the world. With the continuing developments of exemptions like Regulation A+ and Regulation CF, companies have a powerful mechanism to raise this needed capital without the costly expense of going public through an IPO.

 

However, this increased access to capital does not come without great responsibilities. Any company taking investments from shareholders are obligated to carry out their duties to their shareholders.

 

By definition, shareholders own a portion of the company depending on how much they have invested. With that ownership, shareholders are granted rights such as voting, access information, and participate in meetings. As a company that has taken investments from these individuals, the company must ensure that these rights are maintained.

 

First, companies are required to hold an annual general meeting, sometimes called an annual shareholder meeting. During these meetings, companies must present information on the company and allow shareholders to vote on company matters. It is the company’s duty to shareholders to conduct this meeting within 150 days of the end of their fiscal year, notifying shareholders no less than 20 days before and no more than 50 days before the meeting is scheduled to be held. If a shareholder is not able to attend, they should be able to cast their vote by proxy.

 

Additionally, companies must allow shareholders to access the information they are permitted to view. Such information includes the company’s articles of incorporation, bylaws, financial statements, meeting minutes, and corporate stock ledgers. The company must provide this information to its shareholders when requested.

 

Beyond these duties, it is also the duty of the company, its directors, and leadership to make business decisions with good judgment. In transactions, the directors should not personally benefit from any decision at the company’s expense. Officers should also conduct themselves the same way, decisions should be made so that they are in the best interest of the company.

 

Any company with shareholders is responsible for conducting business in the best interest of the shareholders and the company itself. Shareholders must be required to vote on significant decisions, while the company must provide shareholders with important company information they are permitted to have access to. Maintaining these duties is essential to good and legal business practices.

What is a RegA+ Annual Shareholder Meeting?

Posted on by Oscar Jofre

With Regulation A+ allowing companies to raise up to $75M USD, the regulation enables many great investors to support an issuer’s journey. From the everyday person to accredited investors, people can claim their stake in companies they foresee to be long-term successes. However, with shareholders come significant responsibilities issuers must uphold to maintain compliance with securities regulations. One such requirement is holding an AGM.

 

An Annual General Meeting, or simply AGM, is a meeting of shareholders that companies are required to hold once per year. The purpose is to provide shareholders with an update on the company and what plans lie ahead. During these meetings, the company’s directors will present annual reports to shareholders that are indicative of its performance. AGMs are a critical component of upholding the rights of shareholders, ensuring that they are provided all necessary information to make the right decisions regarding their investments. Typically, these meetings should be held after the end of the company’s fiscal year, giving shareholders adequate notice to attend or attend by proxy.

 

A company’s articles of incorporation and bylaws will outline the rules for an AGM, however, they typically include a review of the minutes from the previous AGM, financial statements, approval of the board of directors’ previous year actions, and election of directors. AGMs held by private companies do not require any regulatory filings but require them to check or change their bylaws to ensure that the meeting can be held online and information can be distributed digitally.

 

Before any AGM, shareholders will receive a proxy statement, which outlines the topics to be discussed at the meeting. The statement will include information on voting procedures for shareholders with voting rights, board candidates, executive compensation, and other matters that are important to a shareholder. The company will typically send shareholders a package containing this information by mail or over the internet if that is their preference. For shareholders that have invested directly in the company and their name is in the company’s official records, they are entitled to attend the meeting in person. For shareholders that have purchased shares through a broker-dealer or investment bank, they can request information on how to attend the meeting and cast their votes. Shareholders with the option to eVote can satisfy SEC requirements. Since 2007, “notice to access” rules enable companies to send a one-page notice to inform shareholders that materials are available online rather than being mailed a full copy of all reports.

 

AGMs are essential for the success of any private company, ensuring that shareholders are well-informed about company decisions and can exercise their voting rights. KoreConX offers our clients an all-in-one AGM planner as part of the REgA+ end-to-end solution. Our solution helps our clients maintain full compliance with securities laws, manage AGMs end-to-end, distribute circular materials, allow shareholders to securely vote online, and enable everyone to participate. We recognize that your shareholders are an important part of your company and strive to simplify the process of managing your relationships with them.

 

Annual shareholder meetings for RegA+ offerings are an essential part of compliance. Issuers are required to hold this meeting annually, empowering their shareholders to be active participants. Contact KoreConX to learn more about our AGM planning solution.

 

Reg A and Reg CF Issuers: Time to Count Your Shareholders!

Posted on by Sara Hanks

Reg A and Reg CF have been around for a few years now and we are finding that some of our clients, especially those that have made multiple offerings, are getting to the point where they need to consider the implications of Section 12(g) of the Securities Exchange Act, which requires companies to become registered with the SEC when they meet certain asset and investor number thresholds.

Let’s start with the requirements of Section 12(g). It says that if, on the last day of its fiscal year, an issuer has assets of $10 million and a class of equity securities held of record by either 2,000 persons or 500 persons who are not accredited investors, it has to register that class of securities with the SEC.

Drilling down on each of those elements:

  • Assets: This is gross, not net, and it will include any cash that a company has raised in an offering but not spent yet.
  • Class of equity securities: Issuers with multiple series of preferred stock or multiple series in a series LLC will need to talk to their lawyers about what constitutes a separate “class.”
  • Held of record: Brokers or custodians holding in “street name” count as a single holder of record. Crowdfunding SPVs created under the SEC’s new rules also count as one holder, and as discussed below, there are special, conditional, rules for counting Reg A and Reg CF investors.  But check with your lawyers whether you need to “look through” SPVs formed for the purpose of investing in Reg D offerings.
  • Accredited status: Issuers are probably going to have to make assumptions as to the accredited status of their investors unless they maintain that information separately, and assume investors in Reg D offerings are accredited, and investors in Reg A and Reg CF offerings are not.
  • Registering a class of securities in effect means filing a registration statement with all relevant information about the company and becoming a fully-reporting company. This includes PCAOB audits, quarterly filings, proxy statements, more extensive disclosure and all-round more expensive legal and accounting support.

Since becoming a fully-reporting company is not feasible for early-stage companies, both Reg A and Reg CF are covered by conditional exemptions from the requirements of Section 12(g). The conditions for each are different.

Issuers need not count the holders of securities originally issued in Reg A offerings (even if subsequently transferred) as “holders of record” if:

  • The company has made all the periodic filings required of a Reg A company (Forms 1-K, 1-SA and 1-U);
  • It has engaged a registered transfer agent; AND
  • It does not have a public float (equity securities held by non-affiliates multiplied by trading price) of $75m, or if no public trading, had revenues of less than $50m in the most recent year.

Issuers need not count the holders of securities issued in Reg CF offerings (even if subsequently transferred) as “holders of record” if:

  • The company is current in its annual filing (Form C-AR) requirements;
  • It has engaged a registered transfer agent; AND
  • It has total assets of less than $25m at the end of the most recent fiscal year.

It’s important that the issuer’s transfer agent keep accurate records of which exemption securities were issued under, even when they are transferred. As of March 15, 2021, Reg CF also allows the use of “crowdfunding vehicles”, a particular kind of SPV with specific requirements for control, fees, and rights of the SPV in order to put all of the investors in a Reg CF offering into one holder of record. This is not available for Reg A, and still comes with administrative requirements, which may make use of a transfer agent still practical.

If an issuer goes beyond the asset or public float requirements of its applicable conditional exemption, it will be eligible for a two-year transition period before it is required to register its securities with the SEC. However, if an issuer violates the conditional exemption by not being current in periodic reporting requirements, including filing a report late, then the transition period terminates immediately, requiring registration with the SEC within 120 days after the date on which the issuer’s late report was due to be filed.

It’s good discipline for companies who have made a few exempt offerings and had some success in their business to consider, on a regular basis, counting their assets and their shareholders and assess whether they may be about to lose one or both of the conditional exemptions and whether they need to plan for becoming a public reporting company.

Shareholder Rights and Why They’re Important to Know

Posted on by Oscar Jofre

The first thought that comes to mind when someone says “shareholder,” is Wall Street, understandably, as Wall Street is home to the New York Stock Exchange and NASDAQ, the two largest stock exchanges in the world. In this sense, becoming a shareholder is dependent on owning stock. A common word in the financial industry, a stock is a unit of measure for how much of a company a shareholder owns. When it comes to the stock market found on Wall Street, those are stocks being traded in public companies, like Apple, Microsoft, and Amazon. These are household names, but there are also privately-owned companies that you would know by name, like Koch Industries, Bloomberg, Staples, and Petsmart. These private companies also have shareholders, who have rights associated with their ownership in a private company. For private company shareholders, there are three major rights; access to information, voting rights, and the ability to attend and participate in meetings.

 

One quick comparison we can make between private and public companies is the number of shareholders they have. Because a public company has shares available on the stock market, there is a greater opportunity for everyday people to grab at least one share, while private companies traditionally have far fewer shareholders because there is less access. However, the JOBS Act is changing the landscape, allowing the everyday investor to access more investment opportunities in private companies through Regulation A+ and Regulation CF. These regulations allow investors to invest smaller amounts of money in exchange for shares of a private company. No longer are these types of investments limited to accredited, angel, and venture capital investors. 

 

However, this plays a role in the rights of shareholders due to the volume of your voice in meetings and decisions. One right that shareholders have is the ability to attend meetings on major decisions in the company. When there are fewer investors in a company, the louder your voice will be in the room. This is important because by owning a part of that company, shareholders gain the right to participate and attend meetings to protect their investment from decisions that they feel would misuse their funds.

 

As a shareholder, you have the right to vote on major decisions being made by the company that could very well change the direction of the company. This again goes back to protecting your investment, as investing in a private company is often a long-term investment. Private company earnings can be paid out to shareholders, but the more likely scenario for a shareholder in a private company, especially if it is not a particularly large company, is a liquidity event, such as going public, buying out shareholders, or by being able to offer shares for sale on a secondary market alternative trading system. Making sure that your investment is safe is why you have the right to vote on major decisions. The same is true for your access to information. As a shareholder in a private company, you have a right to know how the company is doing, to see how your investment is playing out.

 

It is important to know your rights as an investor whether it is in a public or private company because you have put your money in the hands of others with the expectation that they will use it to grow and make more money for you in the future. As an investor in a private company, you have more say than an investor in a public company by the fact that you are one of few as opposed to one of many. Use that power and protect your investment; remember that if you own stock, you own part of the company and have rights. 

What is a Minute Book and Why is it Important?

Posted on by Oscar Jofre

Unlike the name suggests, a minute book is by no means minute. As a business grows, a well-kept minute book becomes an essential record of all important company meetings and allows for the information to be easily accessed when required. With an up-to-date minute book, it makes it easier for companies to keep track of resolutions that affect financial transactions. If the company is ever audited, the minute book provides all the necessary information and references to documents in one place. Let’s break down what exactly you should find in a proper minute book.

 

A minute book should have the company’s certificate of incorporation that serves as proof of the company’s registration. This includes information such as the business’s address, company directors, voting rights, and the company’s purpose. The minute book should also have the company’s bylaws or the rules and regulations that the company and its officers must adhere to. Maintaining a record of bylaws ensures that the company is following the rules they have set to operate by.

 

The minute book typically contains the criteria by which the company’s Board of Directors and officers are chosen. For the Board of Directors, this may include how many are on the board and how long they are to serve.  For officers, it may include which ones are required for the company. In this section of the record, documents can also maintain a record of those who have previously served as a director or officer for the company. Additionally, the minute book should keep track of any meetings or communication with board members.

 

Maintained in the minute book is a record of shares and shareholders. Stock options granted to employees are kept track of, along with the number of shares the company is authorized to sell. Ensuring the company knows the limit to the shares they are legally allowed to sell is very important and is outlined in the certificate of incorporation. Additionally, companies usually maintain a record of any documents they’ve filed in their minute book. Having all documents filed in a common location makes them easier to track and refer back to when needed. Kept in this collection of documents are also various reports, whether they’re annual or special, so that they are easily accessed by authorized parties.

 

While keeping track of all of this information may seem like a daunting task, it is made easier by companies such as KoreConX. Integrated into its all-in-one platform, the KoreConX Minute Book ensures that all company documents are easily located and kept up-to-date. With all documents in a central location, both legal and board members can edit the material directly, without worrying about various versions that might exist offline. This consistency provides companies the ability to better manage their documents, ensuring that everything is accurate and easily accessed when needed.

 

An understanding of what goes into a proper minute book can help your company achieve success and transparency in business. In any situation where essential company documents are necessary, having them readily available cuts down on delays and frustration, making it a smoother process for everyone involved.

Can IRAs Be Used for Private Companies Investments?

Posted on by Oscar Jofre

Individual retirement accounts (commonly shortened to IRAs) allow flexibility and diversity when making investments. Whether investing in stocks, bonds, real estate, private companies, or other types of investments, IRAs can be useful tools when saving for retirement. While traditional IRAs limit investments to more standard options, such as stocks and bonds, a self-directed IRA allows for investments in things less standard, such as private companies and real estate.

 

Like a traditional IRA, to open a self-directed IRA you must find a custodian to hold the account. Banks and brokerage firms can often act as custodians, but careful research must be done to ensure that they will handle the types of investments you’re planning on making. Since custodians simply hold the account for you, and often cannot advise you on investments, finding a financial advisor that specializes in IRA investments can help ensure due diligence.

 

With IRA investments, investors need to be extremely careful that it follows regulations enforced by the SEC. If regulations are not adhered to, the IRA owner can face severe tax penalties. For example, you cannot use your IRA to invest in companies that either pay you a salary or that you’ve lent money to, as it is viewed by the SEC as a prohibited transaction. Additionally, you cannot use your IRA to invest in a company belonging to either yourself or a direct family member. If the IRA’s funds are used in these ways, there could be an early withdrawal penalty of 10% plus regular income tax on the funds if the owner is younger than 59.5 years old.

 

Since the IRA’s custodian cannot validate the legitimacy of a potential investment, investors need to be responsible for proper due diligence. However, since some investors are not aware of this, it is a common tactic for those looking to commit fraud to say that the investment opportunity has been approved by the custodian. The SEC warns that high-reward investments are typically high-risk, so the investor should be sure they fully understand the investment and are in the position to take a potential loss. The SEC also recommends that investors ask questions to see if the issuer or investment has been registered. Either the SEC itself or state securities regulators should be considered trusted, unbiased sources for investors.

 

If all requirements are met, the investor can freely invest in private companies using their IRAs. However, once investments have been made, the investor will need to keep track of them, since it is not up to their custodian. To keep all records of investments in a central location, investors can use KoreConX’s Portfolio Management, as part of its all-in-one platform. The portfolio management tool allows investors to utilize a single dashboard for all of their investments, easily accessing all resources provided by their companies. Information including key reports, news, and other documents are readily available to help investors make smarter, more informed investments.

 

Once investors have done their due diligence and have been careful to avoid instances that could result in penalties and taxes, investments with IRAs can be beneficial. Since it allows for a diverse investment portfolio, those who choose to invest in multiple different ways are, in general, safer. Additionally, IRAs are tax-deferred, and contributions can be deducted from the owner’s taxable income.

Equity Crowdfunding Platforms (RegCF)

Posted on by Oscar Jofre

As of 02 JUNE 2020, there are 51 active RegCF Equity Crowdfunding Platforms helping companies raise up to $1.0M USD.

We are all anticipating that RegCF is going to be potentially increased to a $5 million funding cap.   The SEC has proposed this increase, along with some other changes, and many observers expect the Commission to move forward with a higher funding cap.    

We recently did a Q&A with  Wefunder on what RegCF companies require.

We have compiled the list of 51 Active Equity Crowdfunding Platforms along with the sectors they serve.

Company Name URL City State Sector
Bioverge Portal, LLC https://www.bioverge.com/ San Francisco CA Healthcare
Buy the Block https://buytheblock.com/ Denver CO Community
CollectiveSun, LLC http://collectivesun.market/ San Diego CA Social Ventures
Crowd Ignition https://crowdignition.com/ New York NY General
CrowdsourcedFunded https://crowdsourcefunded.com/ Chicago IL General
EnergyFunders Marketplace http://www.energyfunders.com/ Houston TX Energy
EnrichHER Funding, LLC https://ienrichher.com/ Atlanta GA Loans
Equifund Crowd Funding Portal Inc. www.equifundcfp.com Kanata ON General
EquityDoor, LLC https://equitydoor.com/ Austin TX Real Estate
Flair Portal ( Flair Exchange) https://www.flairexchange.com/ Vancouver BC Gaming
Flashfunders Funding Portal www.flashfunders.co Sherman Oaks CA General
Funders USA https://www.fundersusa.com/ Newport Beach CA Technology
Fundit http://fundit.com/ Fairfield NJ General
Fundme.com, Inc. www.fundme.com Murray UT Technology
Fundopolis Portal LLC https://www.fundopolis.com Boston MA General
GrowthFountain Capital www.growthfountain.com New York NY General
Honeycomb Portal www.honeycombcredit.com Pittsburgh PA General
Hycrowd https://www.hycrowd.com/ Jersey City NJ General
Indie Crowd Funder www.indiecrowdfunder.com Los Angeles CA Film
Infrashares Inc. https://infrashares.com San Francisco CA Infrastructure
IPO Wallet LLC https://ipowallet.com/ https://invest.ipowallet.com/ Sachese TX General
Jumpstart Micro www.jumpstartmicro.com Bedford MA General
Ksdaq https://www.mrcrowd.com Monterey Park CA General
MainVest, Inc. https://mainvest.com/ Newburyport MA General
Merging Traffic Portal llc www.mergingtrafficportal.com Orlando FL General
MinnowCFunding www.minnowcfunding.com Pasadena CA Real Estate
MiTec, PBC (Crowdfund Main Street) https://www.crowdfundmainstreet.com/ Fremont CA Impact
NetCapital Funding Portal www.netcapital.com Lewes DE General
NSSC Funding Portal (SmallChange) www.smallchange.com Pittsburgh PA Real Estate
OpenDeal (Republic) www.republic.co New York NY General
Pitch Venture Group LLC https://letslaunch.com/ Houston TX General
         
Raise Green, Inc. http://www.raisegreen.com Somerville MA Impact
Razitall www.razitall.com Basking Ridge NJ General
SeriesOne https://seriesone.com/ Miami FL General
SI Portal (SeedInvest) www.seedinvest.com New York NY General
Silicon Prairie Holdings, Inc. https://sppx.io/ St. Paul MN General
         
SMBX https://www.thesmbx.com/ San Francisco CA Bonds
Sprowtt Crowdfunding, Inc. https://www.sprowttcf.com/ Tampa FL General
         
StartEngine Capital www.startengine.com Los Angeles LA General
STL Critical Technologies JV I, LLC (nvested) www.nvstedwithus.com St. Louis MO General
         
Title3Funds www.title3funds.com Laguna Beach CA General
Trucrowd www.us.trucrowd.com https://fundanna.com
https://cryptolaunch.us
https://musicfy.us		 Chicago IL General
VedasLabs Inc. https://vedaslabs.io/ New York City NY General
Vid Angel Studios (VAS Portal LLC) https://studios.vidangel.com/ Provo UT Film
Wefunder Portal https://www.wefunder.com San Francisco CA General
Wunderfund www.wunderfund.co Cincinnati OH General
WWF Funding Portal LLC https://www.waterworksfund.com/ Detroit MI Water

If you have any questions about how we can help you with your RegCF contact us

lily@koreconx.io

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