If you’re a founder of a U.S. company thinking about raising capital from foreign investors, chances are good that you’ll want to utilize Regulation S.
There’s a general rule in the United States that if you want to sell stock in your business, you have to register the stock offering with the SEC. The registration process is cost-prohibitive for startups. Luckily, there are a number of commonly used exemptions. If you’re offering stock to US residents, you’ll likely be relying on a Regulation D exemption like Rule 506. Regulation S is a commonly used exemption for US companies that want to sell their stock to foreign investors.
There are two key parts to the Regulation S exemption:
The sale of securities must be an offshore transaction.