Legal Requirements for Seed Financings
Safes and convertible notes are securities. Consequently, transactions involving safes or convertible notes are subject to state and federal securities laws. You should discuss securities law compliance with your startup attorney. We only support using our Fundraising products as part of a private securities offering only to accredited investors.
The following checklist is not comprehensive, but highlights some key compliance matters for a private securities offering.
- Is able to truthfully make the representations and warranties contained in the safe or note purchase agreement, including that the company:
- Is a corporation properly organized and in good standing in Delaware, and has all required authorizations and approvals necessary to complete the transaction.
- Is not in violation or default of anything applicable to the company including, for example, the Company's certificate of incorporation and bylaws and any statute, regulation, court order, judgment, agreement, or similar instrument.
- Will not be in violation or default of anything applicable to the company, nor incur any lien or impairment, nor experience any other adverse change to its business, as a result of the transaction.
- Has (or can obtain on commercially reasonable terms) sufficient legal rights to the intellectual property necessary for its business.
- Has furnished each investor with all material information necessary for the investor to make an informed investment decision.
- Has not made any untrue statement of a material fact and has not made any of its statements misleading by the omission of a material fact.
- Makes any filings required under state and federal securities laws.
- Is a private securities offering made available only to accredited investors.
- Has not involved any form of general solicitation or advertising.
- Is able to truthfully make the investor's representations and warranties contained in the safe or note purchase agreement, including that the investor:
- Has all required authorizations and approvals necessary to complete the transaction.
- Is an accredited investor under Rule 501 of Regulation D of the Securities Act.
- Understands the risk of an illiquid investment of this nature and is able to incur a complete loss of their investment without impairing their financial condition.