Understanding Form D: A Guide for Companies Raising Capital

Form D is a document that must be filed with the Securities and Exchange Commission (“SEC”) by certain companies raising money from investors. The purpose of the filing is to notify the SEC that the company raising money is doing so under a specific federal exemption from registration.

What is a Form D?

A Form D is a notice of an exempt offering of securities. It is a document that must be filed with the SEC by companies that are offering securities for sale under Regulation D of the Securities Act of 1933. Regulation D provides exemptions from the registration requirements of the Securities Act for certain private placements of securities.

PURPOSE: is to provide the SEC and investors with information about the offering, including the type of securities being offered, the number of securities being offered, and the number of investors who have purchased the securities.

The information in Form D is used by the SEC to monitor private placements of securities and to detect fraud or other violations of securities laws.

This notice is an alternative to more traditional, lengthy reports when filing a non-exempt issuance. Companies that sell securities typically have to register with the Securities and Exchange Commission (SEC) under the Securities Act of 1933.

This is a long process and can make it complicated to follow and understand the law. Startups seeking capital can instead file a Form D which is a quicker and simpler process that protects the company from potential legal problems pertaining to new issuance.

Failure to file a Form D can result in fines, penalties, and legal action by the SEC.

1. Compliance with securities laws: Filing a Form D is required by law for companies that are offering securities for sale. By filing a Form D, you are complying with the securities laws and avoiding potential legal issues.
2. Protection against fraud: The information in Form D is used by the SEC to monitor private placements of securities and to detect fraud or other violations of securities laws. By filing a Form D, you are providing investors with transparency and protecting them from potential fraud.
3. Access to capital: Filing a Form D can help you raise capital for your business. By offering securities for sale under Regulation D, you can raise capital from accredited investors without the need for a public offering.
4. Reputation: Filing a Form D can help to establish your company’s reputation as a legitimate business. By complying with securities laws and providing transparency to investors, you are demonstrating your commitment to ethical business practices.

By either registering with the SEC or filing a Form D, a business has complied with securities laws pertaining to a capital-raising event.

1. Timeliness: Form D must be filed with the SEC no later than 15 calendar days after the first sale of securities in the offering. If the first sale of securities occurs before the filing of Form D, the offering may no longer be exempt from registration, and the company may be subject to penalties and legal action.
2. Completeness: Form D must be complete and accurate. The information provided in Form D must be consistent with the information provided in other documents related to the offering.
3. Information Required: Form D requires information about the company, the securities being offered, and the offering itself. The following information is required on Form D:

• Name and address of the company
• Type of organization (e.g., corporation, limited liability company)
• State or country of incorporation
• Name and address of the company’s executive officers and directors
• Description of the securities being offered
• The total amount of securities being offered
• An exemption is claimed under Regulation D
• Use of proceeds from the offering
• Number of investors who have already purchased securities in the offering
• Date of the first sale in the offering

1. Filing Fees: The SEC charges a filing fee for each Form D submitted. The fee must be paid at the time of filing and is based on the total amount of securities being offered.
2. Amendments and Withdrawals: If there are material changes to the information provided in Form D, an amendment must be filed with the SEC. If the offering is canceled or terminated, a notice of withdrawal must be filed with the SEC.

Form D must be filed no later than 15 days after the first sale of securities, and must be filed annually if the offering reported on the original Form D is continuing on the anniversary date of the previous filing.

US Securities and Exchange Commission (SEC) Filings:

• Regulation D Filings: If the securities are being offered to US investors under Regulation D of the US Securities Act of 1933, the AIF must file Form D with the SEC within 15 days of the first sale of securities.
• Private Placement Memorandum: Ensure the private placement memorandum complies with US securities laws and includes all material information required for US investors.

4. FATCA Compliance:

• FATCA Registration: The AIF must register with the IRS to obtain a Global Intermediary Identification Number (GIIN).
• Reporting: The AIF must report information about its US investors to the IRS under the Foreign Account Tax Compliance Act (FATCA). This includes annual filings through Form 8966.

1. How can an Indian company file Form D with SEC?

An Indian company looking to file Form D with the U.S. Securities and Exchange Commission (SEC) as part of an offering of securities to U.S. investors must follow several steps. The process involves complying with both Indian and U.S. securities laws. Here’s a detailed guide:

Steps for Filing Form D

1. Determine Eligibility: Ensure the offering qualifies for an exemption under Regulation D of the Securities Act of 1933. This usually involves private placements to accredited investors.
2. Prepare the Offering:

1. • Legal and Compliance: Engage U.S. legal counsel with expertise in securities law to ensure compliance with all relevant U.S. regulations.
   • Offering Documents: Prepare the necessary offering documents, including a Private Placement Memorandum (PPM), subscription agreements, and other relevant disclosures.

1. Obtain EDGAR Access:

1. • The SEC’s Electronic Data Gathering, Analysis, and Retrieval (EDGAR) system is used to file Form D. The company needs to obtain access to this system.
   • Apply for EDGAR Access Codes:
     • Go to the SEC EDGAR Filer Management website.
     • Complete and submit Form ID to obtain EDGAR access codes. Form ID requires notarization and the submission of supporting documents.

1. Prepare Form D:

1. • Form D Information: Gather the necessary information to complete Form D, which includes details about the company, the offering, and the securities being offered. This includes:
     • The issuer’s name, address, and contact information.
     • Information about related persons, such as executive officers and directors.
     • Details about the offering, including the type of securities, the total offering amount, and the amount already sold.
     • Information about the offering’s exemption and any jurisdictions where the securities will be sold.
   • Online Preparation: Use the SEC’s online Form D application to enter the information.

1. File Form D:

1. • Log into the EDGAR system using the access codes obtained.
   • Complete the Form D filing online.
   • Submit the form electronically through the EDGAR system.

1. Comply with State Regulations:

1. • In addition to federal requirements, comply with state securities laws, often referred to as “blue sky laws.” This may involve filing notices or paying fees in each state where the securities will be offered.

1. Ongoing Compliance:

1. • Ensure ongoing compliance with SEC regulations, including any updates or amendments to Form D if there are significant changes in the offering.
   • File any required periodic reports or notices related to the offering.

Key Considerations

• Legal Counsel: Given the complexities of U.S. securities law and the potential implications of non-compliance, it is crucial to engage experienced legal counsel.
• Accredited Investors: Most Regulation D offerings are limited to accredited investors. Ensure that the investors meet the criteria defined by the SEC.
• Documentation: Maintain thorough records of all filings, investor communications, and compliance activities.

By following these steps, an Indian company can file Form D with the SEC, thereby complying with U.S. securities laws when offering securities to U.S. investors.

Feeder Entity Consideration:

• Feeder Entity: While setting up a U.S.-based feeder entity (a subsidiary or special purpose vehicle) can be a strategy for foreign companies to facilitate investment from U.S. investors, it is not a requirement for filing Form D.
• Direct Offering: An Indian company can directly offer securities to U.S. investors without a U.S. feeder entity, but the Indian company itself must handle the filing of Form D.

https://www.nwcorporatelaw.com/what-is-form-d/

https://www.ecfr.gov/current/title-17/chapter-II/part-230#230.504

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