Flow-through shares are frequently issued in a private placement. A private placement is an offering of securities that is not accompanied by the filing of a prospectus.
Because a prospectus provides certain mandated disclosures and legal protections, securities laws provide that securities issued in a private placement may not be issued to the investing public generally, but only to purchasers who meet certain specified exemptions. The principal exemption is qualification of the purchaser as an accredited investor.
Who qualifies as an accredited investor?
While there are a number of additional categories, the categories listed below are most relevant to participants in our structured flow-through share initiatives. If you meet one of the following categories, you will qualify as an accredited investor:
- An individual who, either alone or together with a spouse, owns financial assets (including cash, securities and insurance contracts, but excluding a home or other real or personal property) worth more than $1 million before taxes but net of related liabilities;
- An individual, who alone or together with a spouse, has net assets (for purposes of this category, all assets including financial assets as above and a home and any other real or personal property are included) of at least $5,000,000;
- An individual whose net income before taxes exceeded $200,000 in both of the last two years and who expects to maintain at least the same level of income this year;
- An individual whose net income before taxes, combined with that of a spouse, exceeded $300,000 in both of the last two years and who expects to maintain at least the same level of income this year;
- A company with net assets of at least $5,000,000.
If you have any questions about the accredited investor exemption or your ability to participate in our structured flow-through share initiatives, please contact us.