Are there any restrictions for marketing and selling (within US) shares of a business enterprise that is formed as a Nevis LLC?

Asked about 1 year ago - Redmond, WA

The proposed business venture involves investment in foreign (multinational) enterprises, but no direct business activity within the US. American investors, however, would be sought to finance the project as limited partners in a Nevis LLC. This foreign registration would be for the purpose of keeping start up costs down, avoiding SEC restrictions and burdens, minimizing tax obligations, and offering enhanced liquidity for future transfer of share ownership. Are there any legal pitfalls to marketing such an investment publicly (given that there will be full disclosure of all particulars)?

Attorney answers (3)

  1. John P Corrigan

    Contributor Level 19

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    Lawyers agree

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    Answered . YES THERE ARE LEGAL PITFALLS AND YOU ARE ASKING FOR BIG TROUBLE HERE -- get yourself a competent U.S. securities lawyer to help you with your plan. Try looking at the 1933 and 1934 Securities Acts and the rules and regulations that govern the potential sale of securities to U.S. investors. Even if you were able to get a Reg. D exemption for private placements under rule 504, 505 or 506 still has a lot of rules to manage.

    My answer is not intended to be giving legal advice and this topic can be a complex area where the advice of a... more
  2. Robert V Cornish Jr.

    Contributor Level 16

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    Lawyers agree

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    Answered . Foreign registration itself doesn't abrogate compliance with US securities laws if you're offering to US clients. You might as well incorporate in the US.

    Also, good luck finding a US bank that will handle funds for a Nevis LLC.

    The foregoing is not legal advice nor is it in any manner whatsoever meant to create or impute an attorney/client... more
  3. Todd Matthew Heine

    Contributor Level 13

    Answered . Your are asking the right questions, as you are aware the a securities offering in the US requires attention to US securities laws. It sounds like you are the person who is offering securities to US investors through an offshore company. This structure certainly offers some benefits; it also adds extra steps in the process.

    I'm stating the obvious: In most situations, the US securities laws are relatively straightforward. Securities offerings are so commonplace that it is pretty easy to find someone to help you comply with affordable compliance fees.

    In most situations, investors prefer structures that are easy to explain and look like opportunities they have already invested in. Membership units in a Nevis raise some issues regarding repatriation, transparency, and multi-jurisdictional structures. That said, it is certainly not impossible if you can figure out what you are doing or get some help in figuring out what to do.

    At the risk of answering a question with more questions, I'd recommend you consider many issues, including:

    - What connections do you have to individual investors?
    - What are those investors' appetites for risk? Complexity?
    - How quickly do the investors want to take distributions?
    - Are the investors accredited or sophisticated?
    - What tax treaties do you expect to rely on in third-party jurisdictions?
    - How do you plan to repatriate distributions?
    - What is your corporate structure?
    - What kind of marketing materials or channels do you expect to use?
    - Who are you working with to ensure appropriate disclosures?
    - What registrations do you plan to make?
    - What is your appetite for legal risks?

    In addition, you'll need to share the details of the investment opportunity with someone you can trust as an advisor. You're on the right track by asking for help from the legal community.

    Hope this helps!

    Total Mobility Law is an international law firm that lets companies do global business with the knowledge and... more

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