Capital markets for private companies continue to present diverse opportunities for financing growth or recapitalizations. Often times we see clients pursuing a liquidity event through a merger or acquisition transaction. When designing deal structures, it is important to keep in mind relevant securities law concepts.

2000 Shareholder Threshold

Following the passage of the Jumpstart Our Business Startups (JOBS) Act in 2012, the shareholder threshold for the registration requirement under the Securities Exchange Act of 1934, as amended, increased from 500 to 2,000. Over the last decade this change has provided growth companies more privacy and breathing room before they decide to file for an initial public offering (IPO), or to become a registrant of the Securities and Exchange Commission (SEC). Acquisitive private companies want to be mindful of this requirement so that when they transition to being an SEC reporting company, they are prepared for the financial reporting burden, and note this requirement in the due diligence process and transaction design.

Transactions with Only Accredited Investors

Federal Requirements: When M&A transactions solely involve “Accredited Investors” under Rule 506 of Regulation D and satisfy certain additional requirements— and the number of investors following the business combination is less than 2,000— registration with the SEC is not required. However, a Form D filing by a knowledgeable securities attorney will be required by the SEC and preparation of a proxy statement style disclosure document detailing the terms of the transaction will be necessary to ensure material disclosures are made to satisfy anti-fraud requirements.

State Law Requirements: Satisfaction of state law requirements is best done working with a knowledgeable securities attorney because the determination as to which states an issuer needs to comply with requires knowledge and experience dealing with the various state securities regulators. The satisfaction of federal and state law exemptions requires obtaining verification information from relevant shareholders as part of the transaction.


In Ohio, Revised Code §1707.03(X) mirrors the exemption for Rule 506 offerings under Regulation D and requires the Issuer to make a notice filing on Form D “within fifteen days” of the first sale in Ohio. This filing requirement is met by filing of a copy or printout of the Form D— as filed with the SEC, typically best done by submission via North American Securities Administrators Association, Inc. Electronic Filing Depository (NASAA EFD).

New York

In New York, the Investor Protection Bureau issued guidance in 2020, clarifying that issuers of general securities (not real estate securities or theatrical securities), beginning on December 2, 2020, selling Covered Securities, including Rule 506 offerings,2 should provide notice to New York State through the NASAA EFD (

Transactions Involving Over 35 Non-Accredited Investors.

These transactions may still qualify for an exemption, depending upon the size and the nature of the transaction. However, it may require a filing with the relevant state jurisdictions and a review.

Transactions Involving Less Than 35 Non-Accredited Investors

These transactions qualify for exemption status as a Covered Securities, and therefore, are merely subject to notice filing obligations. This requirement may be satisfied by filing Form D with the SEC and filing with the NASAA EFD as discussed above.

Because of requirements to satisfy exemptions and anti-fraud requirements, it is crucial that documentation requirements are satisfied to satisfy relevant securities laws and allow for relevant legal opinions to be provided. Involving a knowledgeable securities attorney in this process can facilitate the fulfillment of exemptions and preparation of relevant securities filings and legal opinions.