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Top 10 Practice Tips: Private Placement Transactions

June 23, 2018 (4 min read)

By: Chris Kelly, Jones Day

IN RECENT YEARS, THE STAFF OF THE U.S. SECURITIES AND Exchange Commission (SEC) has undertaken an initiative to bolster capital formation, including by providing companies more flexibility to access U.S. capital markets. As a result, recent changes to law and SEC interpretations provide companies with a broad range of potential private financing opportunities that can be executed more quickly and with less expense than traditional public registered securities offerings. However, the rapidly changing legal and regulatory landscape has also introduced additional nuances and complexity to be considered in the context of these offerings.

Because the consequences of mistakes in a private placement transaction can be severe, it is important for lawyers advising companies in connection with private placements to maintain a deep understanding of evolving securities laws and their interpretations in order to guide these companies in successfully planning, implementing, and executing their private placement transactions. Below are 10 practice points that you should be mindful of in steering a private placement transaction from start to finish.

1. Understand the company’s goals and needs.

Private placements, including private investments in public equities (PIPEs), provide companies with great flexibility, allowing them to issue a variety of instruments— common or preferred equity securities, straight or convertible debt securities, warrants, units, and/or bespoke securities— tailored to meet their particular financing needs. A company considering a private placement may not be familiar with the range of securities available and may not fully appreciate how a particular security fits within its existing capital structure. As a starting point, you should discuss with the company its strategic objectives for the proposed financing within the context of its existing capital structure and, within this framework, assist the company in deciding what type of security is best suited to the company’s goals and needs.

2. Find your U.S. federal securities law exemption for issuance and understand resale limitations.

Private placements occur within a complex and evolving regulatory framework of U.S. federal securities laws, stock exchanges’ rules, regulators’ interpretations, and companies’ own limitations under their existing capital structures. For purposes of U.S. federal securities laws, the fundamental principle is that a company may not offer or sell securities unless the transaction has been registered with the SEC or an exemption from registration is available. For a private placement to comply with the U.S. federal securities laws, there must be a valid exemption from the registration requirements available, and the terms and execution of the proposed offering and sale must comply with the requirements of that exemption. You should engage in a collaborative exercise with the issuing company to identify the exemption that is best suited to the proposed transaction from the range of available exemptions, including, among others:

  • Section 4(a)(2) exemption (Section 4(a)(2)) under the Securities Act of 1933, as amended, 15 U.S.C. § 77a et seq., (Securities Act)
  • Safe harbors of Regulation D under the Securities Act
  • Quasi-public offering structure of Regulation A (informally known as Regulation A+) under the Securities Act
  • Crowdfunding exemption under Section 4(a)(6) of the Securities Act (Section 4(a)(6))
  • Exemption for private placements under Rule 144A of the Securities Act (Rule 144A)
  • Offshore transaction exemption under Regulation S of the Securities Act
  • Exchange offer exemption of Section 3(a)(9) of the Securities Act

In order to choose an appropriate exemption, it will be necessary to know various key facts, including the proposed size of the potential offering, identity of the potential investors (and how they will be identified), location of potential investors, whether an investment bank will be engaged to facilitate the offering and, if so, in what capacity, the nature and extent of the marketing and distribution process, and other factors.


To read the full practice note in Lexis Practice Advisor, follow this link.


Chris Kelly is a corporate lawyer with more than 30 years of experience. He represents corporations and financial institutions in diverse domestic and international corporate finance matters including public equity and debt offerings, Rule 144A high yield offerings, private capital raisings, reorganizations, restructurings, recapitalizations, and acquisition transactions. Chris, a partner at Jones Day, regularly advises SEC reporting companies on corporate governance, board of directors, securities laws, stock exchange rules, and related public company regulatory compliance matters.

Related Content

For an overview of private placements, see


RESEARCH PATH: Capital Markets & Corporate Governance > Private Offerings > Private Placements > Practice Notes

For more information on issues to consider when conducting a private placement of securities, see


RESEARCH PATH: Capital Markets & Corporate Governance > Private Offerings > Private Placements > Practice Notes

To see a checklist of tasks to be undertaken in the closing of a private offering, see


RESEARCH PATH: Capital Markets & Corporate Governance > Private Offerings > Private Placements > Checklists

To learn more about private offering exemptions, see


RESEARCH PATH: Capital Markets & Corporate Governance > Private Offerings > Private Placements > Practice Notes