Private Placement Memos – Pros and Cons of Using an Attorney

There are numerous legal concerns in creating a Private Placement Memorandum (PPM) and it is definitely recommended to have the document reviewed by an attorney at some point. However, hiring the services of a lawyer to draft the entire document has advantages and disadvantages.

Pro: Deep legal experience

Assuming you’ve chosen a lawyer well (remember, not all lawyers are perfect), you’ll get the right advice on how to comply with federal and state regulations while reducing your company’s legal liability in a private placement offering. . The lawyer must be able to relate every aspect of the document to these needs, ensuring that no misleading disclosures or words are made that could increase the possibility of future fraud claims.

With: business experience

However, while the lawyer is busy preparing the PPM to protect your legal interests, he is not addressing the business requirements of the document. They won’t be able to tell how likely it is that investors will believe in your business ideas and that you will raise the capital. They will not be able to comment with experience on your business strategy and techniques as a salesperson and presenter.

With: payment in advance

In addition, lawyers will require payment of the PPM at the time of its creation, well before the capital has been raised. This payment can range from $50,000 to $200,000 or more and it can take six to twelve months to raise money from a private placement. The cash paid by a lawyer to write the PPM can be badly lost during this time.

Con: Need for separate brokerage services

In order to carefully and legally sell your shares to private investors and institutions, your company will need to raise funds itself or hire a licensed broker-dealer after the PPM ends. By using a broker whose company can also write the PPM (with legal review), you can save a great deal of money and ensure that the document is written by a long-term partner whose financial success is tied to yours.