Understanding Private Placements
By Sylvia M. Scott
Private placements are, in the simplest terms, a way for businesses to raise capital by selling securities to private investors. Rather than
making shares in a company available to the general public (as with an initial public offering),
a private placement makes those shares available to only a limited number of suitable
individuals.
An obvious benefit of private placements is that they do not have to be registered with the
Securities and Exchange Commission. Recent legislation has been passed to make private
placements a more viable form of capital raising and to make private capital more readily
available to owners of small businesses who might otherwise find raising capital too difficult.
Nonetheless, businesses that offer private placements must be careful to follow the many rules that continue to govern private offerings. To ensure that the process goes smoothly and
passes legal muster, businesses should be sure to work with an accountant and attorney who are familiar with the legal and financial
requirements of private placements.
About Sylvia M. Scott:
Sylvia M. Scott serves as an attorney with Freeman, Freeman & Smiley LLP. In addition to representing clients in court, Ms. Scott and her partners advise clients on private placements,
underwritings, and securities registration.