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Can I offer equity to investors without violating securities laws in Alaska? What are the requirements?
To offer equity to investors in Alaska, you must comply with the securities laws in the state. The requirements for offering equity securities in Alaska are outlined in several statutes, including AKST 21.40.040, AKST 21.40.030, AKST 10.06.305, AKST 45.55.175, and AKST 45.56.130.
Exemption of certain sales of equity securities
Under AKST 21.40.040, a purchase and sale, or sale and purchase, of an equity security of a domestic stock insurance company not then or theretofore held in an investment account, by a dealer in the ordinary course of business and incident to the establishment or maintenance of a primary or secondary market, otherwise than on an exchange as defined in the Securities Exchange Act of 1934, as amended, for the security is exempt from AS 21.40.020.
Unlawful sales of equity securities
AKST 21.40.030 prohibits a beneficial owner of more than 10 percent of a class of equity security, or a director or officer, from directly or indirectly selling an equity security of the company if the person selling the security or the principal of that person does not own the security sold, or if owning the security, does not deliver it against the sale within 20 days after the sale or does not within five days after the sale deposit it in the mails or other usual channels of transportation.
Issuance of and requirements for shares
AKST 10.06.305 allows a corporation to issue one or more classes or series of shares or both, with full, limited, or no voting rights and with other rights, preferences, privileges, and restrictions as are stated or authorized in its articles of incorporation. All shares of a class shall have the same voting, conversion, and redemption rights and other rights, preferences, privileges, and restrictions, unless the class is divided into series. If a class is divided into series, all the shares of a series shall have the same voting, conversion, and redemption rights and other rights, preferences, privileges, and restrictions.
Exemption for certain security sales and offerings
AKST 45.55.175 provides an exemption for certain security sales and offerings. An offer or sale of securities conducted solely in Alaska to a person who has established residency in Alaska by an issuer in a transaction that meets the requirements of this section is exempt from the requirements of AS 45.55.070 — 45.55.120 and 45.55.150. The issuer of the security shall be a for-profit corporation, another for-profit entity, or a business cooperative, have its principal place of business in Alaska, and be licensed by the department. The transaction must meet the requirements of the federal exemption for intrastate offerings in 15 U.S.C. 77c(a)(11) (Securities Act of 1933) and 17 C.F.R. 230.147. The sum of all cash and other consideration to be received for all sales of the security in reliance on this exemption may not exceed $1,000,000, less the aggregate amount received for all sales of securities by the issuer within the 12 months before the first offer or sale made in reliance on this exemption. The issuer may not accept more than $10,000 from a single purchaser during a 12-month period unless the purchaser is an accredited investor as defined by 17 C.F.R. 230.501. The issuer reasonably believes that all purchasers of securities are purchasing for investment and not for sale in connection with a distribution of the security. A commission or remuneration may not be paid or given, directly or indirectly, for any person’s participation in the offer or sale of securities for the issuer unless the person is registered as a broker-dealer, agent, investment adviser representative, or state investment adviser under AS 45.55.030 or 45.55.035. The issuer of the security shall deposit in an escrow account in a bank or other depository institution authorized to do business in Alaska all funds received from investors until the minimum target dollar amount for the security offering is met. The issuer may not be, either before or as a result of the offering, an investment company as defined by 15 U.S.C. 80a-1 - 80a-64 (Investment Company Act of 1940), or subject to the reporting requirements of 15 U.S.C. 78m or 78o (Securities Exchange Act of 1934); or a broker-dealer, agent, investment adviser representative, or state investment adviser subject to AS 45.55.030 or 45.55.035. The issuer shall inform all purchasers that the securities have not been registered under AS 45.55.070 — 45.55.120, are exempt from AS 45.55.150, and may not be resold unless the securities are registered or qualify for an exemption from registration under AS 45.55.900.
Small intrastate securities offerings
AKST 45.56.130 provides an exemption for small intrastate securities offerings. An offer or sale of securities conducted solely in Alaska to a person who has established residency in this state, by an issuer in a transaction that meets the requirements of this section, is exempt from the requirements of 45.56.100, 45.56.170 — 45.56.230, and 45.56.550 and is subject to the following limitations: the issuer of the security shall be a for-profit corporation, another for-profit entity, or a business cooperative, have its principal place of business in this state, and be licensed by the department; the transaction must meet the requirements of the federal exemption for intrastate offerings in 15 U.S.C. 77c(a)(11) (Securities Act of 1933) and 17 C.F.R. 230.147; the securities must be offered to and sold only to persons who have established residency in this state at the time of purchase; before any offer or sale under this exemption, the seller shall obtain documentary evidence from each prospective purchaser that provides the seller with a reasonable basis to believe the investor has established residency in this state; the sum of all cash and other consideration to be received for all sales of the security in reliance on this exemption may not exceed $1,000,000, less the aggregate amount received for all sales of securities by the issuer within the 12 months before the first offer or sale made in reliance on this exemption; the issuer may not accept more than $10,000 from any single purchaser unless the purchaser is an accredited investor as defined by 17 C.F.R. 230.501; the issuer reasonably believes that all purchasers of securities are purchasing for investment and not for sale in connection with a distribution of the security; a commission or remuneration may not be paid or given, directly or indirectly, for any person’s participation in the offer or sale of securities for the issuer unless the person is registered as a broker-dealer, agent, investment adviser representative, or investment adviser under AS 45.56.300 — AS 45.56.350; the issuer of the security shall deposit in an escrow account in a bank or other depository institution authorized to do business in this state all funds received from investors until the minimum target dollar amount for the security offering is met; the issuer may not be, either before or as a result of the offering, an investment company as defined by 15 U.S.C. 80a-1 — 80a-64 (Investment Company Act of 1940), or subject to the reporting requirements of 15 U.S.C. 78m or 78o (Securities Exchange Act of 1934); or a broker-dealer, agent, investment adviser representative, or investment adviser subject to AS 45.56.300 — AS 45.56.350; the issuer shall inform all purchasers that the securities have not been registered under AS 45.56.100, 45.56.170 — 45.56.230, and 45.56.550 and may not be resold unless the securities are registered or qualify for an exemption from registration under AS 45.56.110, 45.56.120, or 45.56.150; in addition, the issuer shall make the disclosures required by 17 C.F.R. 230.147(f); the issuer shall require all purchasers to sign a statement acknowledging that they are investing in a high-risk, speculative business venture, that they may lose all of their investment, and that they can afford the loss of their investment; this exemption may not be used in conjunction with any other exemption under this chapter, except the exemption to institutional investors under AS 45.56.300 and 45.56.340 and for offers and sales to controlling persons of the issuer; sales to controlling persons may not count toward the limitation in (3) of this subsection; this exemption may not be construed to remove any person from the anti-fraud provisions under AS 45.56.500 — 45.56.560, and the exemption may not be construed to provide relief from any other provision of this chapter other than as expressly stated.
Based on the above statutes, it is possible to offer equity to investors in Alaska, but you must comply with the requirements outlined in AKST 45.55.175 and AKST 45.56.130.
Jurisdiction
Alaska