Reg CF cap tables and crowdfunding vehicles

Start with accurate ownership records

A capitalization table records the company’s ownership and related rights. Before a Reg CF raise, reconcile issued shares, options, warrants, SAFEs, convertible notes, and any other securities that could affect future ownership. Keep the supporting agreements and approvals with those records.

The offering introduces more than a new dollar total. It can add security holders, future conversion calculations, voting instructions, and information obligations. Reg CF requires disclosure of the ownership and capital structure. The intermediary must also have a reasonable basis for believing the issuer can keep accurate security-holder records. Rules 201 and 301 address these requirements.

A spreadsheet may explain a simplified scenario. The actual records need to reflect the contracts investors signed and the securities the company issued.

Direct ownership and vehicle ownership work differently

In a direct structure, investors hold the issuer’s offered security themselves. In a crowdfunding vehicle structure, investors hold securities of a separate vehicle, and the vehicle holds the operating issuer’s securities. The vehicle can therefore appear as a holder on the operating issuer’s cap table.

That arrangement can organize ownership administration, but the underlying investors and their rights still exist. Someone must maintain the vehicle’s own records and handle the required information and instructions. A shorter operating-company cap table does not eliminate the investor relationship.

The choice also depends on the security. A direct SAFE holder owns a contractual security, not necessarily stock today. The security selection guide explains why contract type matters before you choose an ownership structure.

Rule 3a-9 defines a narrow crowdfunding vehicle

A Reg CF crowdfunding vehicle is a specific structure under Investment Company Act Rule 3a-9. It has the sole purpose of acquiring, holding, and disposing of securities of a single crowdfunding issuer and raising capital under Reg CF. It cannot borrow money. It uses the proceeds of its securities sales solely to purchase one class of securities of that issuer and itself issues only one class. Read Rule 3a-9.

This is not a general-purpose investment fund. It cannot choose a portfolio of different businesses or treat investor capital as a pool for unrelated opportunities. The label “SPV,” meaning special purpose vehicle, does not establish compliance. The structure and its actual operation must satisfy the rule.

Investor rights must pass through the vehicle

Rule 3a-9 requires a one-to-one relationship between the issuer securities held by the vehicle and the vehicle securities outstanding, including their type and rights. It also requires the vehicle to seek investor instructions for voting the issuer securities and participating in specified transactions, then act in accordance with those instructions.

The vehicle must pass required disclosures to investors and preserve specified rights that investors would have if they invested directly. Rule 3a-9(a)(6) through (9) describe these protections.

Do not assume that a vehicle automatically gives the founder unrestricted voting control. Voting arrangements need to match the underlying securities and the rule. Investors should understand both what they hold and how they exercise the rights attached to that investment.

The structure adds costs and co-issuer obligations

The operating issuer and the crowdfunding vehicle are co-issuers in the Reg CF transaction. They jointly file Form C with the required disclosures about both parts of the offering. A company also selling directly in a separate offering needs to account for the separate filing requirements. The SEC’s issuer guidance explains co-issuer treatment.

The issuer must undertake to fund or reimburse the vehicle’s formation, operation, and winding-up expenses. Compensation to the vehicle’s operator must come solely from the issuer. The vehicle must share the issuer’s fiscal year-end. These requirements make vehicle administration part of the company’s financing budget.

Evaluate the actual legal, accounting, recordkeeping, and ongoing administrative work. A structure that helps one company’s investor administration may add unnecessary cost to another company’s smaller raise.

Shareholder-count relief has conditions

Reg CF does not automatically exempt a company forever from Exchange Act registration based on shareholder counts. Rule 12g-6 excludes qualifying Reg CF securities from the record-holder calculation when the issuer is current in required Reg CF annual reports, has no more than $25 million in total assets at its last fiscal year-end, and engages an SEC-registered transfer agent for those securities. Read Rule 12g-6.

Exceeding the asset threshold has a specified transition rule, subject to timely reporting. That is a reason to review the company’s status with counsel as it grows, not to assume a registration obligation arises from any single threshold alone.

Crowdfunding vehicles also have a separate record-holder rule. Natural-person holders and entity holders receive different treatment, and both the issuer and the vehicle need analysis. The SEC describes these vehicle-specific provisions.

That Exchange Act analysis is separate from ending Reg CF annual reporting. For the fewer-than-300-holder reporting exit, SEC staff instructs issuers to count the investors in a crowdfunding vehicle individually. A vehicle does not turn those investors into one holder for that test. Read SEC Question 202.02 and our annual reporting guide.

Decide the structure before preparing the public explanation

Bring your current cap table, outstanding agreements, expected investor profile, and future financing plans to the offering discussion. Ask who maintains each set of records and handles conversions, investor instructions, and ongoing reports.

Issuance Express can review a proposed eligible crowdfunding vehicle structure as part of portal fit and coordinate the required offering work with your team and partners. Availability and suitability depend on the transaction’s eligibility and compliance review. Your counsel and tax adviser should evaluate the structure’s legal and tax consequences. Read annual reporting and offering costs, then share your proposed raise with Issuance Express.