Closing Documentation for Private Placement Investments

  • Closing documents include agreements between the Issuer and the Investor wherein the parties commit to participate in the offering and the specific terms of the investment relationship. These documents are executed by the Investor and/or by the Issuer as appropriate to the nature of each agreement (see below per each type of agreement).
  • Closing documents can include the following documentation,

For an equity investment:

  • Private Placement Memorandum (“PPM”) – When used, the PPM is the definitive document for the offering to describe the terms of the offering and relevant background of the issuer.  It is produced by the Issuer and is for informational purposes.  It is not a signed document.
  • Articles of Incorporation (for C Corporations) or Operating Agreement (for Limited Liability Companies) – For equity offerings, the Agreements which establish the framework for a business corporate governance and include the obligations of the issuer relating to the equity being purchased by investors.  If equity warrants are issued in conjunction with debt, the warrants will be identified within this fundamental document of the Issuer.  These agreements also specify the distribution of equity ownership (including options to acquire equity) that will be in effect after the new equity securities are issued.  It is signed by the Investor and the Issuer.
  • Subscription Agreement (or Purchase Agreement) – The agreement wherein the Investor commits to make the investment and the amount invested. The Investor makes representations including their competence and ability to make the investment decision.  The Issuer male representations including that the securities have been authorized within its corporate governance structure.  It is signed by the Investor and the issuer.

For a debt investment:

  • Private Placement Memorandum (“PPM”) – Same as above.
  • Loan and Security Agreement (LSA) – The LSA, if used, specifies the overall loan governance structure and includes borrowing covenants committed to by the Company issuing the debt security.  It is signed by the Issuer and the Investor.
  • Promissory Note – This is the definitive evidence of the terms for the indebtedness, including interest due, principal repayment timeframe, default events, penalty rates and related remedies.  It is signed by the Issuer.
  • Borrowers Certificates – For a debt offering, the Issuer may provide certificates with respect to loan covenant compliance at closing, to be updated periodically as long as the debt security is outstanding. 
  • Subscription Agreement (or Purchase Agreement)  – Same as above.