Current through Register Vol. 41, No. 3, September 23, 2024
A. In accordance with § 13.1-514B 7 b of
the Act, an offer or sale by the issuer of any of the following securities
issued by a corporation, partnership, limited liability company, or real estate
investment trust, as the case may be: note, stock, bond, debenture, evidence of
indebtedness, partnership interest, share of beneficial interest in a real
estate investment trust, a warrant or right to purchase or subscribe to any of
the foregoing or a security convertible into any of the foregoing, shall be
exempt from the securities, broker-dealer and agent registration requirements
of the Act, provided the following conditions are met:
1. In connection with an offering pursuant to
this section, there shall be no more than 35 purchasers in this Commonwealth
during any period of 12 consecutive months;
2. In connection with an offering pursuant to
this section, the issuer shall:
a. Deliver
Form VA-1 and in certain prescribed circumstances, Part 2 of Form VA-1 or a
disclosure document containing the information required by Form VA-1 and Part
2, if required, to each prospective purchaser prior to a sale to a purchaser;
and
b. Sell securities only to
purchasers, each of which the issuer shall, after reasonable inquiry, believe
either:
(1) Has sufficient knowledge and
experience in financial and business matters to be capable of evaluating the
merits and risks of the prospective investment, and is able to bear the
economic risks of the prospective investment; or
(2) Together with a purchaser representative
or representatives, has sufficient knowledge and experience in financial and
business matters to be capable of evaluating the merits and risks of the
prospective investment, and that the purchaser is able to bear the economic
risks of the prospective investment; and
3. No commission or similar remuneration is
paid or given, directly or indirectly, for soliciting a prospective purchaser,
or in connection with sales of securities in reliance on this section, unless
paid to a broker-dealer and its agent who are registered under the Act and the
securities are offered only to persons whose investing history demonstrates an
ability to evaluate the merits and risks of the investment and who are capable
of bearing the economic risks of the investment.
B. This exemption is not available with
respect to an offering:
1. Pursuant to a
registration statement or Regulation A (
17 CFR
230.251 -
230.263) notification which has
been filed under the Securities Act of 1933;
2. Pursuant to an exemption under Regulation
D (17 CFR
230.505) , which offering may be exempted in
Virginia only by
21VAC5-40-30, Uniform Limited
Offering Exemption;
3. If the
amount of money to be raised from the offering exceeds $2,000,000;
4. If the issuer has offered for sale or sold
its securities which are of the same or a similar class as that to be offered
for sale or sold under this section within 180 days prior to this offering or
if the issuer offers for sale or sells its securities that are of the same or a
similar class as those offered and sold under this section within 180 days
after this offering; or
5. If the
issuer does not have its principal place of business in this
Commonwealth.
C. An
exemption under this section is not available if the issuer, its directors,
officers, partners, members, trustees or beneficial owners of 10% or more of a
class of its voting securities, or its promoters or agents connected with it or
a person offering or selling the securities for or on behalf of the issuer:
1. Has been convicted (or has pleaded nolo
contendere) within five years prior to reliance on this section of a felony or
a misdemeanor in connection with the purchase or sale of a security, or in
connection with making a false filing with the SEC or a state securities
administrator or of a felony involving fraud or deceit, including but not
limited to, forgery, embezzlement, obtaining money under false pretenses,
larceny, conspiracy to defraud, or theft;
2. Is subject to an order, judgment or decree
of a court of competent jurisdiction that temporarily or preliminarily
restrains or enjoins, or is subject to an order, judgment or decree of a court
of competent jurisdiction, entered within five years prior to reliance on this
section, which permanently restrains or enjoins a person from engaging in or
continuing a practice or conduct in connection with the purchase or sale of a
security, or involving the making of a false filling with the SEC or a state
securities administrator;
3. Is
subject to a United States Postal Service false representation order entered
within five years prior to reliance on this section; or
4. Is subject to a state administrative order
entered within five years prior to reliance on this section by a state
securities administrator in which fraud or deceit was found.
D. The issuer shall file with the
commission 15 days prior to the first sale in this Commonwealth in reliance on
this section:
1. A copy of Form VA-1,
including Part 2, if applicable or a disclosure document containing the
information required by the Form;
2. An executed Consent to Service of Process
(Form U2) appointing the Clerk of the commission as its agent for service of
process;
3. An undertaking to
promptly provide to the commission, upon request, additional information as the
commission may require; and
4. A
nonrefundable filing fee of $250 payable to the Treasurer of
Virginia.
E. The issuer
shall, within 30 days after the completion of the offering, file with the
commission a report of sales indicating the number of purchasers in this
Commonwealth, a description of the securities sold to such purchasers, and the
total dollar amount raised.
F. This
section does not exempt persons or transactions from the anti-fraud provisions
of the Act.
G. The commission may
deny the exemption if it determines that a particular transaction or offering
is not in the public interest.
H.
For purposes of this section and § 13.1-514B 7 b of the Act, the following
shall apply:
1. Neither the issuer nor persons
acting on its behalf shall offer or sell the securities by form of general
solicitation or advertising, including but not limited to, the following:
a. "Cold calls" by telephone or other means,
advertising, article, notice, or other communication published in a newspaper,
newsletter, magazine, mass mailing, electronic media, or similar media or
broadcast over television or radio; or
b. Seminars or meetings whose attendees have
been invited by general solicitation or general advertising.
2. Securities acquired in a
transaction under this section shall not be resold without registration under
or exemption from the Act. The issuer or a person acting on its behalf shall
exercise reasonable care to assure that the purchasers of the securities in an
offering under this section are purchasing for investment and not with a view
to distribution of the securities. Reasonable care shall include, but not be
limited to, the following:
a. Reasonable
inquiry to determine whether the purchaser is acquiring the securities for
himself or for other persons;
b.
Placement of a restrictive legend on the certificate or other document
evidencing the securities. The legend shall be in the following form: THE
SECURITIES REPRESENTED BY THIS CERTIFICATE (OR OTHER DOCUMENT) HAVE BEEN ISSUED
PURSUANT TO A CLAIM OF EXEMPTION FROM THE REGISTRATION OR QUALIFICATION
PROVISIONS OF FEDERAL AND STATE SECURITIES LAWS AND SHALL NOT BE SOLD OR
TRANSFERRED WITHOUT COMPLIANCE WITH THE REGISTRATION OR QUALIFICATION
PROVISIONS OF APPLICABLE FEDERAL AND STATE SECURITIES LAWS OR APPLICABLE
EXEMPTIONS THEREFROM;
c. Issuance
of stop-transfer instructions to the issuer's transfer agent with respect to
the securities, or, if the issuer transfers its own securities, notation in the
appropriate records of the issuer; and
d. Obtaining from the purchaser a signed
agreement that the securities will not be sold unless they are registered under
the Act or exempted from registration.
3. All sales that are part of the same
offering under this section shall meet all the conditions of this section.
Offers and sales that are made more than six months before the commencement of
an offering under this section or are made more than six months after
completion of an offering under this section will not be considered part of
that offering, so long as during those six-month periods there are no offers or
sales of securities by or on behalf of the issuer that are of the same or a
similar class as those offered or sold under this section. If securities of the
same or a similar class as those offered pursuant to this section are offered
or sold less than six months before or after an offer or sale pursuant to this
section, those offers to sell or sales, will be deemed to be "integrated" with
the offering.
I. In
proceedings involving this section, the burden of proving the exemption or an
exception from a definition or condition is upon the person claiming
it.
J. The exemption authorized by
this section shall be known and may be cited as the "Domestic Issuer Limited
Transactional Exemption."
Statutory Authority
§§ 12.1-13 and 13.1-523.1 of the Code of
Virginia.
