What is a nominee?
As companies grow and change over time, they sometimes need investors to make decisions about their investments or about the future of the company. A nominee is an agent that has the right to act on behalf of investors—rather than having companies collect decisions individually from thousands of Republic investors. Republic’s nominee process has specific contractual rights, including voting, which follow a predetermined company appointee’s instruction. This also includes the ability to agree to convert investments into custodial accounts on behalf of investors. Learn more about custodial accounts here.
For offerings using a nominee through Republic, Republic Investment Services LLC (f/k/a/NextSeed Services, LLC), a subsidiary of OpenDeal Inc. dba Republic is the nominee. A nominee rider is attached to each company’s Crowd SAFE or relevant security instrument. .
Note: The nominee is typically only used in Regulation Crowdfunding Offerings.
What does this mean for investors?
Generally, you won’t need to read, interpret, or sign complicated legal documents on short notice. This structure also makes it easier for companies to take in more investment from institutional investors to continue growing the company (and your investment).
In more detail, this nominee structure simplifies the process of approving voting decisions for both the company and for you, the investor. When a Crowd SAFE is converted into equity (or shares)—or is affected by a change of control or liquidity event—the nominee handles certain paperwork to make the transaction as smooth and quick as possible for the issuer. The investor is the legal and “beneficial owner” of the security, while the nominee has “the franchise” over the security and can agree to convert or change the title of the security. The nominee is not a fiduciary and will look to a pre-disclosed third party (the company’s CEO, its board, a lead investor, or some other party known to all investors) for direction on matters of voting and economic decisions affecting the securities it is the nominee for.
Republic Core LLC (“Core”) provides technology and support services to OpenDeal Inc. and its affiliates (collectively, the “Republic Ecosystem”). Republic Note holders and as well as users of the site and services maintained by the Republic Ecosystem, regardless of and their activities on or relating to the Republic Ecosystem, are subject to the applicable terms of service, in their entirety.
Core is currently conducting an offering of Republic Notes under Rule 506(c) of Regulation D under the Securities Act of 1933, as amended (the “Securities Act”) to persons who are accredited investors, as that term is defined in Rule 501. Only accredited investors are eligible to participate in the Rule 506(c) offering. Accredited investors who wish to participate in the Rule 506(c) offering should receive and review carefully the Private Placement Memorandum pertaining to that offering, as it contains important information for potential investors to consider prior to making an investment decision. Accredited investors who wish to participate in the Rule 506(c) offering will be required to (i) complete a subscription agreement, (ii) acknowledge that they have received and read the Private Placement Memorandum, and (iii) provide information verifying their status as accredited investors.
Core is also “testing the waters” with respect to the sale of Republic Notes under Regulation A of the Securities Act. The “testing the waters” process allows companies to determine whether there may be interest in an eventual offering of its securities to qualified purchasers under Regulation A. Core is not under any obligation to make an offering under Regulation A. No money or other consideration is being solicited for an offering under Regulation A at this time and, if sent, it will not be accepted.
Core may choose to make an offering to some, but not all, of the people who indicate an interest in investing, and that offering may or may not be made under Regulation A. For example, Core may choose to proceed with its offering under Rule 506(c) without ever conducting a Regulation A offering, in which case only accredited investors within the meaning of Rule 501 will be able to buy Republic Notes.
If and when Core conducts an offering under Regulation A of the Act, it will do so only once (i) it has filed an offering statement with the Securities and Exchange Commission (“SEC”), (ii) the SEC has qualified such offering statement and (iii) investors have subscribed to the offering in the manner provided for in the offering statement. The information in the offering statement will be more complete than any test-the-waters materials and could differ in important ways. Prospective investors who are interested in participating in the Regulation A offering must read the offering statement filed with the SEC, when that offering statement becomes publicly available.
No money or other consideration is being solicited at this time in connection with any potential Regulation A offering and, if tendered, will not be accepted. No offer to buy securities in a Regulation A offering can be accepted and no part of the purchase price can be received until an offering statement is qualified with the SEC. Any offer to buy securities may be withdrawn or revoked, without obligation or commitment of any kind, at any time before notice of its acceptance is given after the qualification date. Any indication of interest in Core’s offering involves no obligation or commitment of any kind.