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Instructions For Notification Of Exemption For Small Maine Issuers QFORMi - Maine
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NOTIFICATION OF EXEMPTION FOR SMALL MAINE ISSUERS UNDER 32 MRSA 10502(2)(Q) Revised April 30, 2001 ******************************************************************** Title 32, section 10502(2)(Q) of the Maine Revised Statutes Annotate d provides an exemption from the registration requirements of section 10401. The exemp tion applies if the following conditions are met: 1) The securities being sold are those of: a) a corporation, limited partnership or limited liability company org anized under the laws of Maine, or b) any other issuer determined by the Securities Administrator, by ord er, to have its principal executive office in Maine; 2) in consequence of the sale, the corporation will not have more than 25 security holders, excluding financial and institutional investors as def ined in section 10501(4); and 3) the securities have not been offered to the public by general advertisem ent or general solicitation. Anyone relying on the exemption is required to file wi th the Securities Administrator a form, Notification of Exemption for Small Maine Issuer s Under 32 MRSA 10502(2)(Q). In addition, a copy of the Notification of Exempt ion, in its final form, must be provided to all persons to whom offers are made. For this reason, it is important that the information on the form be as accurate, complete, and current as pos sible. The Division cannot tell you exactly how to complete the Notification fo rm for your particular company because we are not familiar with your business. In ad dition, the role of this office is to enforce the Revised Maine Securities Act, and it is no t appropriate for us to provide legal advice to you. However, the following information may be u seful as you complete the Notification form. The Importance of Disclosure Revised April 30, 2001 American LegalNet, Inc. www.USCourtForms.com<<<<<<<<<********>>>>>>>>>>>>> 2Information - Notification of Exemption under 32 MRSA 10502(2)(Q) Page 2 When it issues securities, a company assumes certain legal responsibilit ies and obligations under state and federal laws. The company must tell potentia l investors about itself, its owners, its securities, its business, and the risks involved in investing in the company. This is known as disclosure. Disclosure is how potential investors learn important information about your company. It is how your company tells its story. Potential investors w ill use this information to decide whether to invest in your company. A buyer can test drive a used car and take it to a mechanic. The car is a tangible asset. You can see it and touch it. But a security is an intangible asse t. The value of the security depends on how the company performs and on how the market evalu ates the companys possible future performance. Of course, companies have tangible assets, such as plants, equipment, co ntracts, books, or records. But investors usually dont get to look at those asse ts or to interview the companys management. Instead, they rely on the company to disclose all material information to them before they make a decision to invest in the compa ny. Material information is the facts and data that a reasonable person would need to know to make an informed investment decision. Both federal and state securities laws require the company to provide co mplete and accurate disclosures about the company to potential investors. If the co mpany makes material misstatements or omits material information, an investor can su e the company and can also complain to federal and state regulators. Preparing you disclosure documents is one of the most important parts of your offering. It demands time and concentration, as each component must be p resented clearly enough so that the average person can understand it. When a company reli es on the securities exemption in 32 M.R.S.A. 10502(2)(Q), the Notifica tion of Exemption for Small Maine Issuers under 32 MRSA 10502(2)(Q) is one of the di sclosure documents you will give to potential investors. Well-prepared disclosure documents may protect the company, and its offi cers and directors, from possible lawsuits by dissatisfied investors who may late r claim that the company made material misrepresentations or inadequate disclosure. For t his reason, disclosure should always be in writing. Revised April 30, 2001 American LegalNet, Inc. www.USCourtForms.com<<<<<<<<<********>>>>>>>>>>>>> 3Information - Notification of Exemption under 32 MRSA 10502(2)(Q) Page 3 Federal Securities Law Have you determined how your plans for raising capital comply with the f ederal securities laws? If securities are sold in violation of those laws, purc hasers may be able to take legal action against the company. Although we cannot give you advice regarding federal law, we would note that what is known as Securities and Commission Rule 504 generally exempts securities offerings not exceeding $1,000,000 from the federal registration requirements. For mor e information about federal law in general and Rule 504 in particular, you should cont act: Office of Small Business Policy U.S. Securities and Exchange Commission 450 5th Street, N.W. Mail Stop 3-4 Washington, D.C. 20549 Telephone number (202)942-2950 Mechanics of Completing the Notification Form As you complete the form, feel free to use attachments, where necessary, and to refer to the appropriate attachment in your response to the item on the form itself. Scope of the Exemption The exemption under 32 MRSA 10502(2)(Q) does not provide a blanket authorization for your company to sell shares and raise capital for all sales of securities from the time your company has 10 security holders until it has 25 secur ity holders. You must complete the Notification form and claim the exemption for each spe cific offering of predetermined amounts of securities at predetermined prices. The initial Notification form will disclose the amount of securities you r company is offering currently and the unit price of those securities. Then, in the future you can make Revised April 30, 2001 American LegalNet, Inc. www.USCourtForms.com<<<<<<<<<********>>>>>>>>>>>>> 4Information - Notification of Exemption under 32 MRSA 10502(2)(Q) Page 4 new filings for additional offers and include then-current information a bout the company on the form. Use of Proceeds Section I In Item I(3) of the Notification form, provide potential inves tors with specific information about how your company plans to use the proceeds i t receives from the offering.