Legal Question in Securities Law in California
Hello
I want to borrow money from people in two kind APR.
One will be 0% then if i will succeed the second of 20% of borrowed money.
Would that be legal?
Would S.E.C tell its a security and oblige me fill sec filling?
Regards
Asked on 1/12/11, 8:13 am
1 Answer from Attorneys
Bryan Whipple
Bryan R. R. Whipple, Attorney at Law
The format or model of two-tier interest on a business loan is legal and in fact is frequently used. The SEC and state financial regulators would consider the loan a security when the money is borrowed for business or investment purposes. Issuing securities can be done legally with or without registration, but if you don't register, you need to find and stick within an exemption from registration that fits your offering. For a small, closely-held business or where the investors are all "insiders," this is not too difficult.
Answered on 1/17/11, 9:24 am
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