Ala. Admin. Code r. 830-X-4-.07

Current through Register Vol. 42, No. 11, August 30, 2024

Section 830-X-4-.07 - Promoters Equity Investment Ratio

(1) In offerings where the issuer is the promotional or developmental stage, the promoters, insiders, officers, directors and organizers shall participate to the minimum extent of fifteen percent (15%) of the total amount of capital and contributed surplus represented by equity securities being offered to the public. The promoters' equity securities shall be paid for in cash or with tangible assets reasonably valued. In determining the reasonable value of tangible assets contributed, the Commission may take into consideration any values as determined by one or more independent appraisals or otherwise.

(a) An issuer which is in the "promotional and developmental stage" shall mean an issuer which has no significant record of operations or earnings prior to the proposed offering date or the offering of whose securities cannot be justified on the basis of such record.

(b) The promoters shall pay for such securities in the minimum ratio of 1 for 2; for example, common stock proposed to be offered to the investing public at $5.00 per share may not be purchased by a promoter or insider at less than $2.50 per share.

(2) In all limited partnership offerings, the following will be acceptable in lieu of a 15% ratio of equity investment:

(a) In order that a general partner(s) be sufficiently capitalized to indicate the ability to perform the commitments which are made in regard to such programs, the net worth of the general partner(s) must be equal to 15% of the aggregate amount of limited partnership interests to be sold with a maximum net worth requirement of $250,000. The net worth of a general partner(s) shall be revealed by a balance sheet prepared in accordance with generally accepted accounting principles.

(b) The general partner(s) shall make a direct investment, net of commissions, in the limited partnership(s) equal to 5% of the aggregate amount of limited partnership interests to be sold with a maximum participation requirement of $100,000. The required participation may be reduced by 10% of the general partner(s) net worth in excess of the amount required by (1) above.

Author:

Ala. Admin. Code r. 830-X-4-.07

Filed September 30, 1982. Readopted: Filed November 9, 1983.

Statutory Authority:Code of Ala. 1975, § 8-6-23.