New York Codes, Rules and Regulations
Title 13 - DEPARTMENT OF LAW
Chapter IV - INTRASTATE FINANCING
Part 80 - INTRASTATE FINANCING
Section 80.2 - Contents of prospectus

Universal Citation: 13 NY Comp Codes Rules and Regs ยง 80.2

Current through Register Vol. 46, No. 39, September 25, 2024

(a) Cover.

(1) There shall be set forth on the outside front cover page of every prospectus the following statement in capital letters printed in boldface roman type at least as large as 10-point modern type and at least two points leaded:

"THE ATTORNEY-GENERAL OF THE STATE OF NEW YORK HAS NOT PASSED ON OR ENDORSED THE MERITS OF THIS OFFERING. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL. N.Y. #__" (THE "N.Y." NUMBER SHALL BE ASSIGNED BY THE ATTORNEY-GENERAL)

There shall be no other reference to filing with the Attorney-General or the Department of Law anywhere in the prospectus.

(2) There shall be set forth on the outside front cover page of every prospectus the following:
(i) Name and address of the issuer.

(ii) Date of incorporation or organization of issuer and type of issuer entity.

(iii) Type of security being offered.

(iv) Price per unit and minimum and maximum unit that will be sold to any individual purchaser.

(v) Total amount of offering.

(vi) Offering expenses.

(vii) Net proceeds to issuer.

(viii) Date of prospectus and date after which it may not be used.

(ix) The name and address of the principal distributor of the securities.

(x) A statement that "these securities are offered only to bona fide residents of New York State."

(3) The aforesaid shall not constitute a limitation on the contents of the front cover where additional material is essential for full and fair disclosure. However, in no event shall the name of any governmental agency appear on said cover without written authorization from said agency.

(b) Body.

The prospectus should be prepared in clear and simple language. It should contain a table of contents and, where applicable, should contain the information set forth below:

(1) "Introductory Statement".

This section should state the name and the address of the issuer, the year in which the issuer was organized, its form of organization, and a brief statement as to the type of business the issuer is engaged in or proposes to engage in.

(2) "Factors to be Considered by Prospective Purchasers".

Examples of subject matter are given below. This section should state in detail necessary for full explanation of the following types of information, where applicable, plus other applicable risk factors:

(i) that the company is newly organized without history or past business;

(ii) that the type of business proposed is competitive and other companies engaged in this business are larger and better established;

(iii) that the offering price has been arbitrarily determined;

(iv) that there is no public market for these securities;

(v) that the experience and background of the promoters is limited;

(vi) that the promoters have criminal records, have been subject to professional disciplinary proceedings, have made assignments for the benefit of creditors, have been adjudicated bankrupts or have been a principal of any entity that made an assignment for benefit of creditors or was adjudicated a bankrupt or involved in a reorganization in bankruptcy;

(vii) that the current assets of the issuer are less than its current liabilities or that the issuer has a capital deficit;

(viii) that in the event less than all of the offered securities are sold, the risks to investors will increase and the amounts available for the intended purposes will decrease;

(ix) that as a result of this offering the promoters will profit at the expense of the investors and the extent of the dilution thereof of investment of the public;

(x) that if the offering is in the nature of a debt security purchasers will be unable to prevent the dissipation of the assets of the company to their detriment, and that no sinking fund is provided for the retirement of the offered securities;

(xi) that control of the company will remain in the promoters;

(xii) that purchase of the offered securities involves a high degree of risk.

(3) "Profits of Promoters" section.

This section should indicate the direct or indirect interest of any of the promoters of the venture in transactions with the issuer or in any proposed transaction. It should disclose the approximate dollar amounts of all material profits and should indicate what restrictions, if any, there are with respect to future personal dealings with the issuer.

(4) "Use of Proceeds of Offering".

This section should state the principal purposes for which the proceeds of the offering are to be used, including a detailed breakdown of offering expenses, and the amount to be used for each purpose. It should indicate in what order of priority the proceeds will be used for the respective purposes. The specifics of the use should be set forth as opposed to general statements such as "working capital". It is recommended that the section provide that the proceeds of the offering will be held in trust in a special account in a named bank until used for the purposes set forth in the prospectus. Further, it is suggested that provision be made for a minimum amount of money to be raised before any part of the proceeds can be used, and that unless such minimum amount is raised by a definite date all subscriptions will be returned in full. Such arrangements should be fully described. If any securities being sold are to be offered for consideration other than cash, these details should be provided.

(5) "Capitalization".

This section should set forth in tabular form the various types or classes of securities of the issuer outstanding or to be outstanding as a result of the offering, the amount authorized at the date of the prospectus, and the amount as of a date within 90 days prior to the prospectus, and the amount to be outstanding if all of the securities offered by the prospectus are sold. Below this table should be a table setting forth known or anticipated fixed debt maturities or fixed interest or other obligations, including leasehold commitments, for a five-year period.

(6) "Description of Business".

This section should briefly describe the business conducted by the issuer and its subsidiaries and the development of such business during the past five years. If the business consists of the production or distribution of different kinds of products or the rendering of different kinds of services, indicate, insofar as practical, the relative importance of each product or service or class of similar products which contributed 15 percent or more to the gross volume of business during the last fiscal year. This section should also indicate briefly, to the extent material, the general competitive conditions in the industry in which the issuer and its subsidiaries are engaged or intend to engage, and the position of the enterprise in the industry. If several products or services are involved, separate consideration should be given to the principal products or services or classes or products or services.

(7) "Description of Property".

This section should state briefly the location and general character of the principal plants, offices, machinery and equipment and other materially important physical properties of this issuer and its subsidiaries. Where material, details on mortgages, installment contracts, leases and other obligations should be provided.

(8) "Officers, Director and Principals".

This section should contain the name and home address of each officer, director, partner, principal, trustee and other promoters of the issuer, their business background, their experience with respect to the issuer's business, and the percentage of time those in management intend to devote to the business of the issuer. It should also indicate the dollar amount of investment in the company and the compensation and fees of all officers, directors and principals.

(9) "Principal Holders of Securities."

This section should indicate the name and address of all persons who beneficially or of record own 10 percent or more of any outstanding class of the securities of the issuer, the type or class of such security, the type of ownership, the amount owned, and the percentage of class. Where the security holders are offering their securities for resale, their adjusted basis should be stated.

(10) "Description of Securities".

This section should set forth in the form of organization of the issuer outlining briefly such items as dividend rights, voting rights, liquidation rights, pre-emptive rights, conversion rights, sinking fund provisions, liability to further calls or assessments, amendment procedures, repurchase rights, outstanding options, provisions for meetings, etc. together with a summary of the various material documents, such as the certificate of incorporation, by-laws, stockholders agreements, partnership agreement, debenture, indenture, etc. It should also contain full details about the securities offered by the prospectus.

(11) "Pending Legal Proceedings".

This section should indicate any material legal proceedings pending or known to be contemplated, other than ordinary routine claims and litigation incidental to the business, to which the issuer or any of its subsidiaries is a party or of which any of their property is the subject.

(12) "Method of Offering".

This section should indicate what persons are to solicit purchasers on behalf of the issuer, any compensation to be received by them and how the proposed issue is to be offered.

(13) "Annual Reports and Books and Records".

This section should indicate the obligations of the issuer to provide annual reports to investors and a statement as to the nature of the books and records to be maintained, where they will be maintained, the extent to which they will be available for inspection by investors, and the fiscal year of the issuer.

(14) "Experts".

This section should indicate the name and address of all experts, such as accountants, engineers, or attorneys, who passed upon matters relating to the offering.

(15) "Financial Statements".

This section should contain the issuers profit and loss statement for its most recent three fiscal years (or such lesser number of fiscal years during which the issuer has been in existence). If the latest fiscal year ended more than four months prior to the date of the prospectus, a profit and loss statement for a period from the end of such latest fiscal year to a date within four months prior to the date of filing and comparable figures for the same period during the preceding fiscal year should also be provided. In addition, the issuers balance sheet as of the last fiscal year and as of the end of such additional period, if any, should be provided. The balance sheets and profit and loss statements shall be prepared in accordance with generally accepted accounting principles applied on a basis consistent with previous years or periods and shall include an opinion by an independent public accountant as to fairness of presentation of issuer's financial position and results of operations reflected in the financial statements, except where an exemption from said requirement has been granted.

(16) "Other Material Information".

This section should contain all other material details of the offering, if any, not heretofore covered, plus a representation that the prospectus contains a fair summary of material facts, does not knowingly omit any material fact and does not contain any untrue statement of a material fact.

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