Legal Opinion Letter
(Private Placement, Equity Securities) (Issuer's Counsel)

Summary

This legal opinion letter template may be delivered by issuer's counsel to purchasers of common or preferred stock in a private placement exempt from registration under the Securities Act of 1933, as amended (Securities Act), pursuant to Section 4(a)(2) of the Securities Act (15 U.S.C. § 77d) or Regulation D. This template includes practical guidance, drafting notes, and optional clauses. It is customary practice for counsel to the issuer in a private placement to deliver an opinion letter to the purchasers of the securities that includes customary corporate (or other entity) legal opinions (e.g., good standing), as well as opinions covering compliance with the corporate (or other entity) law requirements of the issuer's state of incorporation or organization in authorizing and issuing the offered securities, and compliance by the offering with the requirements for the issuer's claimed exemption from registration under the Securities Act. This opinion letter does not include a negative assurance, or "10b-5," statement. A negative assurance statement is typically provided, either included in an opinion letter or, more commonly, as a separate document, to financial industry intermediaries that engage in extensive due diligence regarding the issuer (most commonly, underwriters of registered offerings and initial purchasers in offerings conducted pursuant to Rule 144A under the Securities Act (17 C.F.R. § 230.144A)) to assist them in defending against claims asserting liability for violations of the federal securities laws in connection with the offering. As the purchasers in a private placement will not be subject to any such potential liability, delivery of a negative assurance statement to them is unnecessary, and requests for it should be resisted. Additionally, because the placement agent in a private placement plays a lesser role, and the disclosure documents and the agent's due diligence investigation are generally less extensive than in an underwritten offering, delivery of a negative assurance statement to the agent is usually not warranted. As many law firms have their own legal opinion letter templates and guidelines, this template should be used as a supplemental drafting aid and not as a replacement for those templates or guidelines. For a full listing of related due diligence for securities offerings content, see Due Diligence for Securities Offerings Resource Kit. For a full listing of key content covering Regulation D offerings, see Regulation D Resource Kit. For more information about legal opinion letters in private placements, see Legal Opinions for Securities Offerings. For an overview and an extensive collection of materials on private placements, including detailed practice notes, templates, and checklists, see Private Placements Resource Kit. In addition, the Legal Opinion Resource Center of the American Bar Association provides links to opinion letter resources, including reports of the TriBar Opinion Committee on Third-Party "Closing" Opinions (1998); The Remedies Opinion – Deciding When to Include Exceptions and Assumptions (2004); Third-Party Closing Opinions: Limited Liability Companies (2006); Special Report of the TriBar Opinion Committee: Duly Authorized Opinions on Preferred Stock (2008); Supplemental TriBar LLC Opinion Report: Opinions on LLC Membership Interests (2011), and Third-Party Closing Opinions: Limited Partnerships (2018), as well as Reports of the ABA Business Law Section (available to members of the that section), all of which provide invaluable advice and guidance on opinion practice.