This topic is not likely to be on your radar as a craft brewer. Securities laws are complex and evolving quickly, trying to stay in step with the changing landscape of business in the modern era.
So, how can you brew up growth in your business while complying with securities laws?
Securities Laws for the Everyday Joe
For most people, securities will come in stocks, bonds, and promissory notes. Any time there is a sale of these securities, state and federal securities laws are activated. Breweries, like other businesses, are securities. When ownership interest in the brewery is offered for sale (think equity, stocks, etc.), these laws are put into motion. The firm or company must either file as public with the Securities and Exchange Commission (SEC) or satisfy an exception to register.
Most capital raised in a brewery's early or developmental stages will meet an exception. Business owners need to do their due diligence to ensure all requirements are satisfied for the exemption and all necessary filings are prepared and submitted correctly. Every offering must result in either registering with the SEC or an exemption, and exemptions require careful attention to ensure compliance. In this instance, having a legal advisor you trust to help navigate your brewery through this process is indispensable.
What Does This Have to Do With Growing My Brewery?
If you want to expand your brewery, increase production, or open a new taproom location, you need capital to fund that growth. At this point, you have a couple of options. If you decide to “go public” with your company and register with the SEC, you will find this opens up several new avenues for capital. Most breweries will want to look into registering as a “small business issuer”. However, while somewhat simplified, this option still comes with several complex obligations such as additional licenses and permits. As a business owner, you will need to weigh out if you can manage the increase of obligations associated with going public. If your offering satisfies and is exempt, a notice alerting the SEC to a securities offering may still need to be filed.
Securities laws are complex and require attention to detail and expert analysis. While brewery owners need to have a basic understanding of how securities laws will affect them and their operations, no one expects you to understand and navigate such complex rules and regulations alone.
- Having a legal advisor on your team versed in securities laws and beer law can help you avoid legal landmines early on. This will help direct the development and growth of your brewery, saving you costly penalties and fines, as well as protecting your future appeal to larger investors.
- Look at your business plan/model and reevaluate your growth plan to see where the SEC or securities laws may come into play. Knowing what is coming down the pipeline in the future will shape decisions and actions today.