Headquartered in New York, the finance center of the world, our capital market group provides innovative solutions to a wide variety of capital raising and compliance and governance issues our clients face in the U.S. capital market. Our approach to client service allows our lawyers to effectively and efficiently meet the needs of our clients. We represent the Issuers and Underwriters of Securities, Publicly Held Companies, Private Equity Funds, Venture Capital Funds, Institutional Investors and Stock Transfer Agents.
With the recent sweeping changes in regulations and expectation with respect to governance and risk management, the need for a multi-disciplined, global approach will continue to increase and our Capital Markets lawyers are uniquely positioned and skilled to address those needs. As market regulations and capital flows continue to evolve, we will continue to be at the forefront of these developments.
We take a pro-active role and believe that quarterbacking a deal is the key to its success. We know better about what is important to our clients because of our advantage of Chinese language and culture, which enables us to anticipate problems before they arise and devise solutions.
Alternative Public Offering (APO)
Lacking from the options currently available to most growth-stage Chinese companies is effective access to public finance. Unlike the United States, these companies are shut off from access to their local public markets. Fortunately a solution exists in the form of an alternative public offering (APO). An APO is an alternative form of listing that allows companies in emerging markets to gain access to the deepest and most liquid capital market in the world. APO is the combination of a reverse merger with a simultaneous private investment of public equity (PIPE). It allows companies an alternative to an initial public offering (IPO) as a means of going public while raising capital. In an APO, the transaction allows a company’s stock to be publicly traded following a merger or similar transaction with a publicly held shell company, whereby the equity owners of the private company typically take control of the former shell company. The difference of “alternative” aspect of the transaction involves the mechanism used to affect the listing. Whereas in a traditional IPO, a company engages an investment banker to organize and manage a flotation of the company’s stock, in an APO the company merges with a “listing vehicle” that provides the initial public shares and qualifications.
Alternative public offerings (APOs) have been around for over a decade in one form or another, but their development has been particularly interesting since the financial crisis broke. In the new market environment, we expect the APO to be more widely accepted as a viable alternative to traditional IPOs, especially among small to mid-tier companies seeking access to U.S. capital markets and companies from foreign emerging markets that need to establish a Western presence and Western style practices before being positioned to attract more traditional institutional investors.
Benefits of APO over traditional IPO:
- Lower costs,
- Much shorter process times, and
- Less dilution of the private company’s management’s, founders’, and/or prior investors’ ownership after going public.
APO is one of the exciting ways Dai & Associates’ attorneys can help Chinese companies go public. We help prepare companies to make the significant transition to the public domain by providing detailed, step-by-step guidance to management and to the boards of directors. We maintain a very strong working relationship with the Securities and Exchange Commission, which enables us to take clients effectively and efficiently through the regulatory review process in the United States. This variety of APO is appealing to China-base operating companies due to the fact that through the already-proved successful model of “reverse merger +PIPE,” Chinese companies would be able to “jump” from OTC BB to a senior exchange.
"Blue Sky" Laws Compliance
The Registration & Compliance Division of Dai & Associates provides a full range of legal and compliance services targeted to the needs of hedge funds, investment advisors, broker-dealers and other financial organizations, and the entrepreneurs who create them. As a client of Dai & Associates, you will benefit from our ability to provide personalized legal and compliance services in a structure that contains costs but never compromises quality. We will take the time to understand your business and not provide “off the shelf” or “one size fits all” solutions. Our legal service in relation to securities“Blue Sky” Laws Compliance include:
Regulation D Filing
The Securities and Exchange Commission (“SEC”) amended its rules to revise the information required to be furnished on Form D, effective September 15, 2008, and, after a transition period, to require the form to be filed electronically beginning on March 16, 2009. In its release amending Form D, the SEC clarified when amendments to a Form D are required and included the requirement that for a continuous offering an amendment must be filed annually on or before the first anniversary of the Form D filing. The Firm will prepare the Regulation D for the company.
If the company anticipates any Form D filings after March 15, 2009, the company will need to obtain SEC electronic filing codes in order to access the SEC’s electronic filing system. The Firm will review whether any amendments to Form D filings will be required in the next year.
New Issues Compliance
Investment advisers that may purchase stock in initial public offerings for accounts must obtain written representations every 12 months from the accounts’ beneficial owners regarding their continued eligibility to participate in “new issues” under FINRA (formerly the NASD) Rule 2790. Representations of funds-of-funds through their questionnaires regarding their ability to participate in “new issues” profits and losses are valid for one year, but a recertification must be obtained annually thereafter. Investment advisers should contact us regarding the appropriate documentation to use for recertification, and the proper use of “negative consent” letters.
Annual Privacy Notice
Compliance Procedures Review
As a best practice, investment advisers should annually review their established policies and procedures. The policies and procedures should be reviewed to ascertain whether each employee has certified their compliance with those procedures on a quarterly or annual basis, and submitted certification to a compliance officer by the end of each year.
Schedules 13D or 13G
Investment advisers may be required to file Schedule 13D or 13G if they exercise voting power or investment discretion of five percent (5%) or more of a class of securities of a publicly traded company. Any material changes to Schedule 13D must be reported promptly. If an investment adviser previously filed a Schedule 13G, they are required to file an amended schedule annually if there are any changes since the most recent filing.
Forms 3, 4 and 5
Filing of an initial ownership report with the SEC on Form 3 may be required of investment advisers that exercise investment discretion or voting power over more than 10 percent (10%) of a class of equity securities of a public company. That filing must be made within 10 days after exceeding the 10% threshold. Also, an insider’s changes in the beneficial ownership of securities must generally be reported on Form 4 within two business days after the date of the transaction at issue. Form 5 must be submitted by all persons who were insiders of a publicly traded company during the reporting year, to report transactions that were not required to be reported on Form 4 and had not voluntarily been reported earlier on Form 4. Form 5 must be submitted within 45 days after the fiscal year.
Investment advisers, whether or not they are registered with the SEC, must file a report of holdings on Form 13F within 45 days after the end of the first calendar year in which they reached the $100 million threshold investment (as of the end of any month) in 13(f) securities traded on a national securities exchange. Quarterly filings are required thereafter. In general, 13(f) securities include exchange-traded securities, shares of closed-end investment companies and certain convertible debt securities.
New Short Sale Reporting Obligations
The SEC has adopted Rule 10a-3T which requires institutional investors who exercise discretion over accounts holding $100 million or more in Section 13(f) securities to file information on a weekly basis reporting their short sales and positions of Section 13(f) securities (other than options). This reporting requirement covers transactions having a fair market value of $10 million or more. Reports must be filed on nonpublic Form SH and need only be filed for weeks where the investor has actually effected short sales. Rule 10a-3T is effective from October 18, 2008 through July 31, 2009; it will cease to be effective thereafter unless the SEC extends it.
Compliance with pre-offering and post offering State “Blue Sky” law requirements (i.e. New York State’s Form D or state-specific filings)
Debt Offerings and Rule 144A Offerings
We advise on investment grade debt issuances. We also regularly advise issuers and underwriters on Tier 1 offerings, convertible debt offerings, high yield offerings, and 144A offerings.
Debt offering is a debt instrument offered for purchase by private investors - normally with warrants for future stock purchases at fixed prices. This is a way for companies to raise debt financing by selling notes with a set annual return rate and a schedule on when the full payment will be made to investors. This is very similar to a private business loan. Using a debt offering, a company can avoid giving up ownership or future profit in the business. We counsel our clients in connection with medium-term note programs, commercial paper programs, and other continuous offering programs.
Rule 144A offerings are made only to qualified institutional purchasers (such as large financial institutions), in amounts often equal to traditional public offerings, but without the need to file the offering with the SEC and comply with the resulting reporting requirements. We represent a broad range of companies in Rule 144A Transactions, including: issuers, purchasers and investment banks, domestic and foreign, in all aspects of these highly valued alternatives to traditional public offerings.
Debt Repurchases, Exchange Offers and Tenders
In light of current market conditions, many debt securities are trading significantly below their face values, creating an attractive opportunity for issuers to repurchase their debt at discounts. When an issuer embarks on a systematic program of repurchasing debt securities, it may be treading into the territory of tender offers and may subject itself to disclosure and filing obligations pursuant to the Securities and Exchange Commission (SEC)’s tender offer rules.
We provide a wide array of services to emerging growth companies at all stages of development, including financing and other Strategic transactions and exits like debt repurchases, exchange offers and tenders.
Exchange Act Reporting and Other SEC Compliance
Our professionals have significant expertise in drafting, filing and procuring effective SEC registration statements and with counseling clients on SEC compliance issues, including the Sarbanes-Oxley Act of 2002 and the 1934 Exchange Act periodic reporting obligations. With the emergence of the Sarbanes-Oxley Act of 2002, public companies are subject to increased disclosure requirements and new corporate governance requirements for securities traded on the Nasdaq, NYSE, AMEX, OTCBB, Pink Sheets, etc., and we offer extensive legal assistance on the above matters.
We leverage our extensive experiences in working with the SEC on comments to registration statements and periodic filings to minimize the amount of comments on our registration statements and periodic filings. Our burgeoning experience also allows us to effectively counsel companies on compliance with state Blue Sky laws and other securities law issues such as reorganizations, recapitalizations, board of director and shareholder issues, and employee stock option plans (ESOPs).
Additionally, we also represent issuers in assisting FINRA registered broker/dealers in the Form 15c211 process to obtain stock quotations on the Over the Counter Bulletin Board (OTCBB) and Pink Sheets, OTCOX Markets, and with national and international exchange listing applications and regulations for the Nasdaq, NYSE, AMEX and London's AIM Market.
Global Equity Offerings
We have significant experience in all types of initial and secondary public offerings and rights offerings, including SEC-registered deals, private placements, debt/equity swaps, convertibles, American Depositary Receipts and exchange offers. Our capital markets lawyers work closely with our lawyers in our tax, finance, antitrust and environmental and industry practice groups, making them well-placed to advise clients in connection with any corporate, tax or regulatory issues that may arise prior to, or following, the completion of a transaction.
We assist our clients in drafting and negotiating the offering document, as well as any related legal agreements, and deal with all aspects of regulatory compliance, including SEC registrations, US securities laws and stock exchange listings.
We have successfully taken numerous private companies public through reverse mergers, direct public offerings by filing a registration statement and underwritten IPOs. We specialize in going public transactions utilizing a reverse merger and PIPE offering that provides companies with an alternative method of going public without an underwriter. This alternative public offering is considerably quicker and less expensive than a traditional IPO that fit the need of small to middle sized companies.
Initial Public Offering (IPO)
To many business owners, going public represents a financial milestone: it is public recognition of their corporate success. It also can be highly profitable. However, the public sale of securities, especially in the U.S. public market, is an expensive process that can subject the company and its owners to liabilities well in excess of the amounts of securities sold, particularly if the sale is poorly planned and supervised. In some cases, it also can add pressures and costs to a company without contributing to the success of a business or its owners. Dai & Associates could help Chinese companies in IPO transactions and successfully gain access to U.S. capital markets without the above risks.
Major Chinese issuers alike rely on our unique ability to handle various types of offerings on venues in the United States, Beijing and Shanghai. Our practice is truly transnational, with our strong team of Mainland capital markets lawyers working seamlessly with U.S. experienced practitioners in our U.S. offices. We have extensive experience in representing companies, especially Chinese companies, in all aspects of the initial public offering process, including:
- structuring and implementing pre-offering corporate reorganizations
- evaluating and implementing antitakeover mechanisms
- designing and drafting officer and director option plans and other equity participation arrangements
- counseling regarding pre-offering publicity and related issues
- preparing the prospectus and registration statement
- working with the staff of the Securities and Exchange Commission to obtain effectiveness of the registration statement
- negotiating the underwriting terms and conditions
- coordinating the participation of selling stockholders in the offering
Our representation does not end at the completion of an IPO, however. In concert with our company representation practice, we routinely advise companies on periodic reporting requirements, securities regulations and other matters that are critical to our clients during and after the IPO process. We offer public companies one of the most experienced and respected corporate practice teams in the world. Our team regularly handles a myriad of issues, especially in areas such as corporate and securities, tax, mergers and acquisitions intellectual property, antitrust and competition, employee benefits and environmental law.
The Firm has a premier practice representing investment banks, investors, and issuers in connection with private investments in public equity financings (PIPEs). PIPEs provide issuers with an efficient means of raising capital while creating new investment avenues for investors. Our attorneys have provided representation in PIPE financings in the United States, China, Hong Kong, and other international markets. This wealth of experience has given our attorneys a keen understanding of all aspects of the market and an appreciation of the needs of all parties involved in a PIPE transaction. In addition, our attorneys' knowledge of the latest positions of the Securities and Exchange Commission and relevant trading markets enables our firm to help clients stay current with the complex regulatory framework governing PIPEs.
The Firm provides a wide range of services in connection with PIPE financings, including:
- Negotiation of engagement letters and term sheets
- Structuring of PIPE financings to best meet expressed goals
- Preparation and negotiation of transaction documents
- Providing advice on stock market listing and applicable SEC regulations
- Assisting with the registration process
- Providing advice on PIPE restructurings and follow-on PIPE investments
As part of our PIPEs practice, we regularly advise our clients in a variety of related transactions, including alternative public offerings and reverse mergers, registered direct offerings and underwritten public shelf offerings.
Investment Bank Representation
Our approach to representing investment banks in PIPEs financings focuses on facilitating a high likelihood of closing on terms that meet the approval of our client as well as the issuer and its counsel. Our PIPEs attorneys work closely with the issuer's counsel from the inception of the offering process to gain an understanding of the issuer's most important concerns. We work to identify potential regulatory and negotiating points most likely to result in transaction obstacles in order to help minimize delays or conflicts that may arise.
Our attorneys have developed long-term relationships with many of the leading investment banks in PIPEs financings. We effectively assist our investment banking clients in developing best practices for successful issuer representations in a complex regulatory environment. As leaders in the practice, our attorneys have gained a deep understanding of the role played by investment bankers in PIPEs transactions, enabling our attorneys to execute a process that encourages a successful PIPEs offering while protecting the client.
Our PIPEs team has extensive experience representing investors in PIPEs. As pioneers of many of the structures employed in PIPEs transactions, our team members can advise on a wide range of structures. Our attorneys understand the issues of greatest importance to PIPEs investors. In addition, our attorneys' knowledge of the complex regulatory environment and stock market rules governing PIPEs transactions enables our firm to protect the business interests of investor clients.
Our attorneys regularly assist public company clients, especially Chinese small-to-middle-sized companies with the SEC compliance and registration process governing PIPEs transactions. Our attorney's knowledge of relevant SEC and stock market rules and pronouncements enables us to assist issuer clients in structuring legally compliant PIPEs transactions. In addition, our reputation and credibility with PIPEs investors and investment banking firms positions us to have successful negotiations on behalf of issuer clients.
A general knowledge of securities laws is often not enough to successfully represent the PIPEs participant. We have seen numerous instances in which an issuer counsel's incomplete understanding of the PIPEs market and regulatory framework led to significant, often unforeseen, problems. The Firm's securities knowledge combined with extensive PIPEs experience makes us the right law firm to protect the PIPEs participant and avoid pitfalls without delaying transactions.
Private placements will be the first stop for a venture capital or entrepreneurial client, or an alternative for a well-established issuer needing to raise capital when the public equity markets are unavailable. Our lawyers regularly advise issuers, agents and investors in connection with private placements of equity, debt and hybrid securities.
Our international private equity practice focuses on representing private equity funds in leveraged acquisitions and subsequent dispositions of portfolio companies, as well as representation of portfolio companies in general corporate and transactional matters.
We work with our financial institution clients to devise new distribution methodologies for securities, especially the PIPEs (private investment in public equity).
Venture capital practice includes representation of both investors and early stage companies that are venture-backed or seeking venture capital investment. Our clients include very early stage companies that are seeking their seed round of venture capital investment and later stage companies that are seeking expansion capital in advance of an initial public offering or transformational transaction.
We provide advice on:
- Structure domestic and offshore entities
- Prepare private placement memoranda and subscription documentation as well as imited partnership agreements and limited liability company membership agreements
- Structure general partner and investment advisor arrangements
- Review business plans
- Provide introductions to venture capital funding sources
- Guide companies through intellectual property and employment law issues
- Provide a full range of contract review, corporate governance, and compliance solutions.
- Provide advice in connection with transfers of limited partner interests, distributions in kind, general partner management changes, dissolution and liquidation mechanics