Did you know under Regulation D Rule 506 you do not need to escrow funds?
Commonwealth Capital, LLC
Business News, business financing, Business Funding
It’s true that under most circumstances there is no requirement for you to escrow proceeds from a securities offering under Regulation D Rule 506(b) or 506(c). However, you must disclose that no escrow agreement or escrow account has been established or will be used, and funds will be used as received, within the securities offering document.
In general, the only time one would need to establish an escrow agreement or escrow account with a bank, is if the securities offering was for a specific asset purchase. The amount of the purchase price then would most likely be the escrow amount.
Escrowing amounts do not need to be all inclusive either. Say that you are purchasing a business for $3,000,000 but needed an additional $2,000,000 in expansion capital. You could offer and sell $5,000,000 in securities, escrow the first $3,000,000 and once you’ve “broke escrow” use the $2,000,000 balance as needed.
It’s simply all about disclosure.
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