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There are numerous legal concerns in creating a private placement memorandum (PPM) and it is definitely recommended that an attorney review the document at some point. However, there are pros and cons to hiring an attorney to draft the entire document in the first place.
Advantage: deep legal experience
Assuming you’ve chosen an attorney well (remember, not all attorneys 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 offer. The attorney must be able to relate all aspects of the document to these needs, ensuring that no misleading statements or statements are made that may increase the chances of fraud claims occurring in the future.
With: Business experience
However, while the lawyer is busy preparing the PPM to protect his legal interests, he does not meet the business requirements of the document. They won’t be able to say how likely it is that investors will believe your business ideas and that you will raise the capital. They will not be able to comment with experience on your business strategy and your techniques as a salesperson and presenter.
With: Payment in advance
Additionally, attorneys will require payment of the PPM at the time of its creation, long before the capital has been raised. This payment can range from $ 50,000 to $ 200,000 or more and can take six to twelve months to raise money from a private placement. Cash paid for a lawyer to write the PPM can be greatly lost during this time.
Disadvantage: Need for separate brokerage services
To carefully and legally sell your shares to institutions and private investors, your company will need to raise funds on its own or hire a licensed stockbroker after the PPM is completed. By using a broker whose signature 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.
