Private Equity Law
In finance, private equity is a class of assets consisting of equity securities and debt in operating companies that are not publicly traded on a stock exchange. Private equity investments are usually made by private equity firms, venture capital firms, or angel investors. Each type of investor provides private equity funding for different reasons, but all provide working capital to business to nurture expansion, the development of a new product, or a restructuring of the company’s operations, management, and/or ownership.
Among the most common investment strategies in private equity investing are leveraged buyouts, venture or growth capital, and mezzanine capital.
In a typical leveraged buyout transaction, a private equity firm buys majority control of an existing or mature firm. The companies involved in these transactions are typically mature and generate operating cash flows.
Venture or Growth Capital Investment
Investors invest in young, growing, or emerging companies. rarely seeking to obtain majority control. Venture and growth capital are similar, except that companies that seek growth capital are likely to be more mature than venture capital funded companies, able to generate revenue and operating profits but unable to generate sufficient cash to fund major expansions, acquisitions, or other investments.
Mezzanine capital refers to subordinated debt or preferred equity securities that are usually the most junior part of a company's capital structure, but still superior to the company's common equity. Mezzanine capital is often used by smaller companies to allows them to borrow additional capital beyond the amounts traditional lenders would be willing to provide via bank loans. In exchange for the higher risk, mezzanine debt holders require a higher return for their investment than other secured investors or more traditional lenders.
For more information on private equity, please have a look at the articles and materials found below on this page. Similarly, for specific information regarding your private equity legal questions, please take a look at the Law Firms page for a list of attorneys in your area who can help.
Private Equity Law - US
- ABA - Committee on Private Equity and Venture Capital
The Committee on Private Equity and Venture Capital focuses on issues facing U.S. and international lawyers who form and represent private equity and venture capital funds and those who advise entrepreneurs and companies seeking financing from those sources. The Committee addresses the regulatory, securities, corporate, tax, intellectual property, and other concerns of the private equity and venture capital communities, including with respect to both investments by funds and the formation of funds.
- Bank Holding Company Act
The Bank Holding Company Act of 1956 (12 U.S.C. § 1841, et seq.) is a United States Act of Congress that regulates the actions of bank holding companies. The original law (subsequently amended), specified that the Federal Reserve Board of Governors must approve the establishment of a bank holding company, and prohibited bank holding companies headquartered in one state from acquiring a bank in another state. The law was implemented in part to regulate and control banks that had formed bank holding companies in order to own both banking and non-banking businesses. The law generally prohibited a bank holding company from engaging in most non-banking activities or acquiring voting securities of certain companies that are not banks.
- Private Equity - Definition
Private equity, in finance, is an asset class consisting of equity securities in operating companies that are not publicly traded on a stock exchange. Among the most common investment strategies in private equity are: leveraged buyouts, venture capital, growth capital, distressed investments and mezzanine capital. In a typical leveraged buyout transaction, the private equity firm buys majority control of an existing or mature firm. This is distinct from a venture capital or growth capital investment, in which the private equity firm typically invests in young or emerging companies, and rarely obtain majority control.
- Private Fund Investment Advisers Registration Act
On July 21, 2010, President Obama signed into law the Private Fund Investment Advisers Registration Act of 2010 (the "Registration Act") as part of the Dodd-Frank Wall Street Reform and Consumer Protection Act. The Registration Act includes amendments to the Investment Advisers Act of 1940 (the "Advisers Act") that will require many investment advisers to private investment funds to register with the Securities and Exchange Commission (the "SEC") under, and comply with, the Advisers Act, and increases recordkeeping and reporting obligations for both registered and certain unregistered advisers, among other changes.
- Private Fund Transparency Act
A bill to require investment advisers to private funds, including hedge funds, private equity funds, venture capital funds, and others to register with the Securities and Exchange Commission, and for other purposes.
- Securities and Exchange Commission
The mission of the U.S. Securities and Exchange Commission is to protect investors, maintain fair, orderly, and efficient markets, and facilitate capital formation. As more and more first-time investors turn to the markets to help secure their futures, pay for homes, and send children to college, our investor protection mission is more compelling than ever.
Organizations Related to Private Equity Law
- Emerging Markets Private Equity Association (EMPEA)
The Emerging Markets Private Equity Association (EMPEA) is a non-profit, independent, global industry association that promotes greater understanding of and a more favorable climate for private equity and venture capital investing in the emerging markets of Africa, Asia, Europe, Latin America and the Middle East.
- Federal Deposit Insurance Corporation (FDIC)
The Federal Deposit Insurance Corporation (FDIC) is an independent agency created by the Congress to maintain stability and public confidence in the nation's financial system by: * insuring deposits, * examining and supervising financial institutions for safety and soundness and consumer protection, and * managing receiverships.
- Federal Trade Commission
The FTC deals with issues that touch the economic life of every American. It is the only federal agency with both consumer protection and competition jurisdiction in broad sectors of the economy. The FTC pursues vigorous and effective law enforcement; advances consumers’ interests by sharing its expertise with federal and state legislatures and U.S. and international government agencies; develops policy and research tools through hearings, workshops, and conferences; and creates practical and plain-language educational programs for consumers and businesses in a global marketplace with constantly changing technologies.
- National Association of Investment Companies (NAIC)
The National Association of Investment Companies (NAIC) is the membership organization for firms dedicated to investment in the United States Emerging Domestic markets (EDM). NAIC member companies invest in privately held businesses that have a high probability of growth and the ability to generate significant returns for investors and shareholders.
- Private Equity Clearinghouse
The Clearinghouse is a web based Venue where holders of exempt private equity interests (Corporate LTD. Partnership, etc.) can post their equities for direct sale to the investing public. These interests should not be registered with the securities and exchange commission and only the owner of the interest is eligible to post it for sale.
- Private Equity Growth Capital Council
The Private Equity Growth Capital Council, based in Washington, DC, is an advocacy, communications and research organization and resource center established to develop, analyze and distribute information about the private equity and growth capital investment industry and its contributions to the national and global economy. The PEGCC opened its doors in February 2007.
- Tuck Center for Private Equity and Entrepreneurship
The Tuck Center for Private Equity and Entrepreneurship aims to advance the understanding of private equity investing—the engine behind the entrepreneurial activity that drives global innovation and productivity. The center focuses on macro and micro issues relating to private equity: capital markets, financing structures, governance and entrepreneurship.
Publications Related to Private Equity Law
- Angel Investor News
Angel Investor News is the premier business angel news service that provides the latest news and resources on angel investors, business funding, venture capital, raising business finance startup investment, seed capital investing, small business funding and handholding, angel investor groups to serious and active business angel investors, angel syndicates, private investors and high net worth individuals. Our news service covers all aspects of entrepreneurialism and we showcase some leading examples of entrepreneurs that are making great strides forward with and without the backing of Venture Capitalists and Angel investors.
- Lingo of Private Equity Investing
The media frenzy surrounding the credit bubble has helped make private equity, which was once only recognized by the most sophisticated investors, a commonplace word. Many mainstream investors have become interested in learning more about the private equity industry. Because of the non-public nature of private equity, it can be difficult to gain access to the lingo used by industry insiders.
- Private Equity Hub
Private Equity Hub is an interactive forum for the global private equity community, which includes venture capitalists, buyouts professionals, public pension funds, endowments, foundations, lenders, investment bankers, attorneys, entrepreneurs, MBA candidates studying PE, and assorted hangers-on. Its mission is simple: To help you do your job better, by filling your head with news and views from/about your peers.
- Private Equity International
PEI is the leading financial information group dedicated to the alternative asset classes of private equity, real estate and infrastructure globally. It is an independent company with over 70 staff based in three regional offices - London, New York and Singapore - and is wholly owned by its management and employees.
- SBA - Understanding Equity Capital
Equity capital or financing is money raised by a business in exchange for a share of ownership in the company. Ownership is represented by owning shares of stock outright or having the right to convert other financial instruments into stock of that private company. Two key sources of equity capital for new and emerging businesses are angel investors and venture capital firms.
- The Deal LLC
Since 1999, The Deal LLC has covered the dealmaking across all its many mutations along with the ups and downs of economic cycles and business leaders. Through print, electronic media and events, we provide original content that serves the news, information and idea generation needs of corporate and financial dealmakers, advisers, intermediaries and investors.
- Wall Street Journal - Private Equity Beat
The Wall Street Journal is an American English-language international daily newspaper published by Dow Jones & Company, a division of News Corporation, in New York City, with Asian and European editions. The Journal primarily covers U.S. and international business, and financial news and issues. Its name derives from Wall Street in New York City, the heart of the financial district, and has been printed continuously since its inception on July 8, 1889, by Charles Dow, Edward Jones, and Charles Bergstresser.
Articles on HG.org Related to Private Equity Law
- Stockholders’ Agreements: Plan Ahead for Owner ExitsOwners of small and mid-sized businesses can spend nearly all of their time running their business, and many times, they do not make time to consider the life changing events that should be addressed in their stockholders’ agreement. Owners hope that the good relationships between owners today will naturally carry forward into the future.
- Issuing Equity to Employees in Exchange for Compensation in a StartupEquity may be issued to employees as a form of compensation when a startup company is initially opening for business. The shares, stock or interest may be passed to these workers, but to do so, the owner should understand fully how this could affect him or her and the business both in the startup phase and later when the equity means more.
- Legal Considerations in Using Other People’s Money to Start Your BusinessInvestments into a new company may take many forms. When the individual has been targeted to become a member of the business, this investment is usually added as an asset or a portion of the company interest or shares are provided in compensation. It is when this is not the case that the matter may become complicated.
- JOBS Act: Initial Public Offering “On-Ramp”The JOBS Act, signed into law on April 5, 2012, is intended to stimulate job creation and economic growth by improving access to the capital markets for smaller companies. In an effort to facilitate capital-raising for private companies, the JOBS Act created a new class of issuer known as an “emerging growth company,” or an EGC.
- JOBS Act: SEC Must Amend Reg D to Permit Advertising for Private Offerings to Accredited InvestorsThe Jumpstart Our Business Startups Act (JOBS Act) has made several important changes to federal securities laws. One of these changes has been to require the SEC to eliminate the restriction under Regulation D prohibiting general solicitation and advertising in connection with certain private offerings.
- JOBS Act Makes Major Revisions to Securities Laws; Eases Capital-Raising for Smaller CompaniesThe JOBS Act is intended to stimulate job creation and economic growth by improving access to the capital markets for emerging growth companies. The JOBS Act contains a number of provisions designed to ease capital-raising for private companies, including:
- How to Raise Money for Your CompanyFor many private and public companies raising funds is essential to get over the hump and on the road to revenues and eventual profits. There are several things companies can do to increase their chances of successfully raising money on favorable terms.
- Venture Capital Terms: A PrimerWhether you are a company looking to raise financing or a potential investor, make sure you understand the important concepts that you will invariably be confronted with in a venture capital transaction. Even if your business is not at the juncture of raising financing, understanding the key terms now will help you start to position the company for an eventual financing round down the road. This Article provides an overview of some of the important terms in a venture deal.
- Financing Independent Film: Tax Credits for Independent FilmIndependent film financing and tax credits are linked and play a huge role in making a successful film. Understanding where these credits are and how to obtain them is vital. Dunlap, Grubb & Weaver, experienced entertainment lawyers can help with this. This article lists the credits available in the United States by jurisdiction.
- All Banking and Finance Law Articles
Articles written by attorneys and experts worldwide discussing legal aspects related to Banking and Finance including: asset protection, capital markets, corporate finance, financial planning, financial services law, investment law, offshore accounts, private equity, project finance, public finance, securities, trade investment and venture capital.