Can I offer equity to investors without violating securities laws in Arizona? What are the requirements?

To offer equity to investors in Arizona, you must comply with the securities laws in the state. The requirements for offering securities in Arizona are outlined in ARS 44-1901. Certain securities offerings are exempt from registration by qualification in Arizona, and the exemptions are outlined in ARS 44-1841 to 44-1849.

Requirements for Offering Securities in Arizona

To offer securities in Arizona, you must register the securities by qualification with the Arizona Corporation Commission (ACC) unless an exemption applies. The requirements for registration by qualification are outlined in ARS 44-1901.

To register securities by qualification, the securities must satisfy the following requirements:

1. The offering must be made through a firm commitment underwriting by one or more securities broker-dealers who are members of a national securities association registered under the Securities Exchange Act of 1934, registered as dealers in Arizona, and not affiliates of the issuer.
2. The total amount of securities offered and sold, in or out of Arizona, is not less than three million dollars.
3. The issuer shall provide to the ACC undertakings that for four years after the registration:

a. The issuer will not engage in any transaction with a promoter or an affiliate of a promoter unless the transaction is approved by a majority of the outside directors after full disclosure or is on terms no less favorable to the issuer than would be available from an unaffiliated third party.

b. The issuer will not issue to any promoter or an affiliate of any promoter any shares, options, warrants or other rights to purchase shares at a price per share less than the market price as of the close of business on the day before the proposed issuance of the shares, options, warrants or other rights to purchase shares.

1. The issuer’s most recent audit report on its financial statements filed with its registration statement or the footnotes accompanying the financial statements do not express reservations about the issuer’s ability to continue in business as a going concern and the most recent financial statements filed with its registration statement do not show that the issuer has both negative shareholders’ equity and negative working capital.

Exemptions from Registration by Qualification

Certain securities offerings are exempt from registration by qualification in Arizona. The exemptions are outlined in ARS 44-1841 to 44-1849. Some of the exemptions include:

1. Securities offered and sold to accredited investors.
2. Securities offered and sold in a transaction that meets the requirements of Rule 506 of Regulation D under the Securities Act of 1933.
3. Securities offered and sold in a transaction that meets the requirements of Rule 504 of Regulation D under the Securities Act of 1933.
4. Securities offered and sold in a transaction that meets the requirements of Rule 147 or Rule 147A under the Securities Act of 1933.
5. Securities offered and sold in a transaction that meets the requirements of Section 3(a)(11) of the Securities Act of 1933.

Special Filing Requirements for Certain Exempt or Federal Covered Securities

If you are offering securities that are exempt from registration by qualification, you may still be subject to special filing requirements. ARS 44-1843.02 outlines the special filing requirements for certain exempt or federal covered securities.

Conclusion

To offer equity to investors in Arizona, you must comply with the securities laws in the state. The requirements for offering securities in Arizona are outlined in ARS 44-1901. Certain securities offerings are exempt from registration by qualification in Arizona, and the exemptions are outlined in ARS 44-1841 to 44-1849. If you are offering securities that are exempt from registration by qualification, you may still be subject to special filing requirements, which are outlined in ARS 44-1843.02.

Jurisdiction

Arizona

• General