Legalities to approaching investors

Hi all,

Does anyone know the legal requirements that must be satisfied before investors (not members of family, etc) can be approached? All the information I have found has only been relevant to America, e.g. SEC regulations etc.

Many thanks,

Richard
 
Consult an attorney as it varies from state to state. For $1,000 in legal fees, it will make you a lot safer for getting investments.

As a basic rule "You can only approach a limited number of people whose net worth is under $1million". The definition of "approach" is what gets people into & out of trouble. Also, do not ever solicit for investments publicly (IE an advertisement or on a public message board or on your site onthe Internet).

If you don't take prcautions, you open yourself up to liability that can screw your finances the rest of your life. I was a former series 7 licenced broker, so take my word for it: Don't take chances.
 
Thanks for the reply (looking forward to seeing 'Horrors of War' by the way). Do you or anyone else out there know what the rules are in the UK? I guess the best way is to consult an appropriate attorney but would like to know the general framework.
 
sonnyboo said:
Also, do not ever solicit for investments publicly (IE an advertisement or on a public message board or on your site onthe Internet).

Sonnyboo,

Could you please explain why?

Is it that it's just tacky and no one will take you seriously?

Please elaborate. :D
 
I understood that getting investment from outside investors, i.e. people with no control or involvement in the project is treated the same way as trying to get someone to invest in a security which has a whole load of mad legal implications (to prevent people getting ripped off by the various scams out there). Correct me if I'm wrong but thats my understanding.
 
CootDog said:
Sonnyboo,

Could you please explain why?

Is it that it's just tacky and no one will take you seriously?
It's illegal. This is one of the reasons people suggest contacting a lawyer - soliciting investors incorrectly can get you into serious legal hot water.
 
Sorry.

sonnyboo said:
Also, do not ever solicit for investments publicly (IE an advertisement or on a public message board or on your site onthe Internet).
So when you asked him to explain why I jumped in and answered.

It is illegal to make public offerings (ie. an advertisement or on a public message board or on your site on the Internet). It is not illegal to ask someone if they want to invest in your movie.

I should have used more of the quote function.
 
Spatula said:
So would all the "seeking investor" posts be illegal? Is it legal to attract investors to a project proposal online?
Not exactly. If the people posting like that were actually making a limited partnership offering then yes, it would be considered illegal by the SEC.

But most are just naive. No legit investor would consider an offer posted on a messageboard because the person asking for money has clearly not followed all the necessary legal steps. Maybe if we're we talking about a couple of hundred or even a coupe of thousand it could work. But neither the investor nor the solicitor would be protected from litigation down the road.

Your second question gets into some really dicey legal areas. I don't know enough about it to summarize it for a message board post. Technically, you could get into trouble. and again - no legit investor would respond to an on line proposal from a person not known to them. Just too dangerous.

I suspect most people who post on line for investors just haven't done their homework . But as many say: "it can't hurt". It can only hurt if you have done it right.
 
Well if you can't post anything online or solicit... then HOW would we go about getting an investor?

I understand structuring it legally and writing a proposal, but then what? Who, what, when, where, and how?
 
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CootDog said:
Sonnyboo,

Could you please explain why?

Is it that it's just tacky and no one will take you seriously?

Please elaborate. :D

It's illegal. As in federal law (SEC Securities & Exchange) - you cannot publicly solicit investments from people whose networth is under $1million. It's to protect people from fraudulent investments.

DIRECTORK is correct in everything he has stated.

Approaching investors is tricky business. There are many books and info on the subject.
 
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Very informative you all... Thank you for the information! I will definitely research this. The current project is in dire need of funding or it's gonna fizzle or just take a couple years to complete. Funding would allow us to bring on a full timer, among other things. Not ready yet, but it's good to know that I can't just start promoting for investors.

Thanks again!
 
It’s difficult to give you the who, what, where, when and how on a messageboard.

Asking for money legitimently to finance a movie is an extremely complicated matter. Assuming you aren’t just going to friends and family for a few thousand, but are asking for tens or even hundreds of thousands of dollars you’re going to need to protect yourself and the investors from fraud and mismanagment.

Weather you start an LLC or a limited or general partnership, you need a Federal ID, a bank account and a business license. And you really should hire the services of a lawyer and accountant. I’m sure some of you are thinking, “hey, I just wanna make a movie, I don’t really need all that business crap”

An investor won’t respond well to that. A legit one won’t, anyway. Especially if you don’t have a solid track record of finished movies.

The short version: You will need to offer shares in a limited partnership and this offering is regulated by the SEC and by “Blue Sky Laws”

Every state has its own securities laws, commonly known as "Blue Sky Laws" that are designed to protect investors against fraudulent sales practices and activities. While these laws can vary from state to state, most states laws typically require companies making small offerings to register their offerings before they can be sold in a particular state.

If any of the security laws are violated, the investor can get a complete refund and can bring criminal charges against you.

Check Regulation D for more info.
 
An earlier issue of MOVIEMAKER magazine has an article you guys might want to read...


Articvle is titled "RICKY BUSINESS" nu David Albert Pierce, Esq.
page 98-99

to paraphrase one section "There is a strict prohibition of general solicitations and advertising. This means that that on that website, you are soliciting potential investments is subjecting you to serious liability. The site is deemed a general advertisement and that's against the law."
 
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