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CfPA Publishes Recommended Term Sheet for Equity Crowdfunding Offers

posted Sep 6, 2014, 11:23 PM by Siamak Ebarhimi   [ updated Sep 6, 2014, 11:24 PM ]
The Crowdfunding Professional Association (CfPA), a not-for- profit, 501(c)(6) trade association for stakeholders in the crowdfunding industry, has announced the availability of a recommended “Termsheet template” for use by participants in JOBS Act Title III (Section 4(a)(6)) Crowdfunding equity offerings.

According to a release, this effort reflects the CfPA’s core mission of promoting the success of all stakeholders in the Crowdfunding community, and addresses several of the potentially important reservations expressed by some about Title III Crowdfunding.

Major provisions of this recommended Termsheet template include:

• Definition of Title III Crowdfunded equity transactions as providing a separate class of Crowdfunding (“CF”) security, distinct from Common shares or other ownership units (to allow the recognition and separate treatment of Crowdfunded security holders.)

• Cancellation by either prospective investor or issuer, for any reason whatsoever and at any time prior to closing, of all commitments to invest or offer and full refund of any funds proffered (to mirror usual practice in private security offerings, and prevent any participant from being locked into a pending transaction that they may have come to regret.)

• Ability of a supermajority of holders of CF equity, by vote proportional to ownership interest, to decide all issues pertaining to the CF security class (to preclude impeding a future transaction of the company by inability to communicate with or obtain consent from a minority of holders, or to simplify the Cap Table by allowing aggregation of all CF interests into a single holding entity.)

• Anti-dilution protection for CF investors (a critical and essential safeguard for all equity holders.)

The CfPa recently announced an Educational conference to be held in Washington, DC in late September.

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