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

To offer equity to investors without violating securities laws in New Jersey, you must comply with the requirements set forth in the New Jersey Uniform Securities Law (NJUSL). The NJUSL provides exemptions for certain securities offerings, which may allow you to offer equity securities without registering them with the state.

Exemptions under NJST 49:3-50

Under NJST 49:3-50, the following securities are exempted from the provisions of sections 13 and 16 of P.L.1967, c.93 (C.49:3-60 and 49:3-63):

  • Any security issued by and representing an interest in or a debt of, or guaranteed by, any insurance company organized under the laws of any state and authorized to do business in this State (subsection 3(a)(5)).
  • Any security issued by a person organized and operated exclusively for religious, educational, benevolent, fraternal, charitable or reformatory purposes and not for pecuniary profit, and no part of the net earnings of which inures to the benefit of any person, private stockholder, or individual (subsection 3(a)(9)).
  • Any offer or sale to a bank, savings institution, trust company, insurance company, investment company as defined in the “Investment Company Act of 1940,” pension or profit-sharing trust, or other financial institution or institutional buyer, or to a broker-dealer, whether the purchaser is acting for itself or in some fiduciary capacity (subsection 3(a)(8)).
  • Any transaction which results in sales to not more than 10 persons (other than those persons designated in paragraph (8) of subsection (b) of this section in this State during any period of 12 consecutive months, whether or not the seller or any of the buyers is then present in this State, if (i) the seller reasonably believes that all buyers are purchasing for investment, and (ii) no commission or other remuneration is paid or given directly or indirectly for soliciting any prospective buyer in this State, and (iii) the securities are not offered or sold by means of any form of general solicitation or general advertising (subsection 3(a)(9)).

Requirements under NJST 49:3-77

If you are offering securities that do not fall under the exemptions listed above, you must comply with the requirements set forth in NJST 49:3-77. This includes providing information to prospective investors in writing on the Internet site through which the offering is made, such as a description of the company, its form and date of business organization, the address and telephone number of its principal office, its history, its business plan, a description of material agreements and the intended use of the offering proceeds, financial statements, and any additional information material to the offering (subsection 1).

It is important to note that this is not an exhaustive list of requirements and exemptions under the NJUSL. You should consult with a legal professional to ensure that you are in compliance with all applicable securities laws and regulations.

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Source(s):
Jurisdiction

New Jersey