Re(1): Reg D PPM Posted on January 31, 2011 at 09:38:13 AM by John Cones
Check the "information requirements"of Regulation D to determine which guidelines you should follow with respect to the issue raised. If SB you will find the following language plus the included instructions helpful:
Reg. §§228.103(Item 103).
(a) If a small business issuer is a party to any pending legal proceeding (or its property is the subject of a pending legal proceeding), give the following information (no information is necessary as to routine litigation that is incidental to the business):
(1) name of court or agency where proceeding is pending;
(2) date proceeding began;
(3) principal parties;
(4) description of facts underlying the proceedings; and
(5) relief sought.
(b) Include the information called for by paragraphs (a)(1) through (5) of this Item for any proceeding that a governmental authority is contemplating (if the small business issuer is aware of the proceeding).
Instructions to Item 103.
1. A proceeding that primarily involves a claim for damages does not need to be described if the amount involved, exclusive of interest and costs, does not exceed 10% of the current assets of the small business issuer. If any proceeding presents the same legal and factual issues as other proceedings pending or known to be contemplated, the amount involved in such other proceedings shall be included in computing such percentage.
2. The following types of proceedings with respect to the registrant are not "routine litigation incidental to the business" and, notwithstanding instruction 1 of this Item, must be described: bankruptcy, receivership, or similar proceeding.
3. Any proceeding that involves federal, state or local environmental laws must be described if it is material; involves a damages claim for more than 10% of the current assets of the issuer; or potentially involves more than $100,000 in sanctions and a governmental authority is a party.
4. Disclose any material proceeding to which any director, officer or affiliate of the issuer, any owner of record or beneficially of more than 5% of any class of voting securities of the small business issuer, or security holder is a party adverse to the small business issuer or has a material interest adverse to the small business issuer.
As you can see, it is not always easy to determine such questions based on the generalities of the guidelines. However, it is always safter from a compliance and potential ligitation standpoint if the disclosure is made.