Private Placement Memoranda and Future Liability

by | Jul 2, 2024 | Legal

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Companies hiring attorneys to create their private placement memoranda have less of a chance of being sued in the future by unhappy investors. There are many risks you face when going after financing for your business plans. Investors already know loopholes they can use to get their money back regardless of whether things go right. Use legal expertise in setting up your starter documents so you can protect your assets in the future.

Don’t Stop at a Draft

Some companies decide to save money in the early stages by hiring a legal firm to draft a PPM without much interaction with the company. The cookie cutter document you wind up with can be tweaked and fitted for your business but does little to protect your future interests in the event that problems arise. Ironically, for the same amount as a flimsy PPM that barely gets the job done, you can hire an experienced group of business lawyers to work with you on paperwork that’s rock solid.

Investors don’t use cheap template providers to ensure their investments. Their lawyers know how to find miniscule problems in PPM to use to their advantage. Don’t give them the opportunity. Work with a solid private placement law firm from the get-go.

Boiler Plate PPM Recipes for Disaster

Many companies sell templates you can fill in yourself for a very small fee. These documents leave out the experience of private funding pros. The clients they’ve had raked over the coals or the frivolous suits brought against them in the hopes of gaining something go a long way in creating a problem-free PPM. A computer program can’t spit this information out. Inexperienced, bottom-dollar representation isn’t going to spend the time to figure it out.

Private placement memoranda need to be taken seriously. They don’t just satisfy a formal need for paperwork. They don’t just tell potential investors about your company either. A quality document will entice investors, while laying down the groundwork to protect your assets should you suffer set-backs.

Investors aren’t foolish businessmen and women. They know how to put their money to work for them. This shows in the fact that qualified, experienced lawyers look over paperwork. You should provide yourself and your business with the same protection. Make sure that, rain or shine, any private placement memoranda in place have the ability to shelter you through a storm.