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When should the PPM investment documents be amended and do existing members need to sign-off on the changes?
PPM Investment document amendments
John Tishler: During our pre-webinar conference call today the panelists all agreed that an EB-5 project issue that comes up frequently in our deals is whether it is appropriate to amend the PPM for every 'material change’ that arises. You certainly have to think about amending the PPM whenever there is any change at all to what’s going on with the deal and what’s been disclosed in your offering documents.
Remember that while you may have finished the documents in March and they’ve been put out into the market, and they were as good as you possibly could make them in March, by the time September rolls around there’s been six months of the world turning and it’s fairly likely that something has changed.
Now, that doesn’t mean that you will necessarily need to amend the PPM as a result of every change to the EB-5 offering because the key legal standard is ‘material change’ and that’s where we go back to what would a reasonable investor think is material? I urge everyone to watch out for this and have conversations with your securities attorney about how things in the deal change over time.
The important question you will want to ask yourself are “Do I need to change my offering documents for the people who haven’t yet invested?” when the offering is still on the market and “What do I do with the people who have already invested?”. There is a different legal standard when answering those questions but you do have to ask both of them and analyze both of them and come to a conclusion that you’re comfortable with.
Bob Cornish: In some cases it may be sufficient to notify existing investors of changes to the PPM without necessarily having them sign-off on those changes.