Backerville is designed with careful attention to regulatory requirements and legal considerations.
🏛️ Investment Club Structure
Our village model operates within established investment club regulations:
- Non-Accredited Participation: Non-accredited employees can contribute shares for village units
- Accredited Requirements: The Super Fund is limited to accredited investors only
- SEC Compliance: Each village stays under 100 members to maintain exemption under Section 3(c)(1)
- Federal Securities Law: Villages comply with the Investment Company Act’s exceptions for private funds
- Operating Agreement: Comprehensive agreement establishes governance, member rights, and obligations
📜 Private Offering Exemption
For the Super Fund, we utilize established private offering exemptions:
- Regulation D: The Super Fund sells interests only to accredited investors under Rule 506(c)
- Appropriate Disclosures: All investors receive comprehensive information about the investment opportunity
- Transfer Restrictions: Units in the Super Fund are subject to appropriate transfer restrictions
- Maximum Size Limitations: The Super Fund is sized to remain under thresholds requiring additional SEC filings
- Integration Prevention: Clear separation between village activities and Super Fund offerings
📄 UCC Filing Requirements
To secure promissory note obligations, Backerville implements a robust UCC filing system:
- Initial UCC-1 Filings: Filed for each promissory note to establish security interest
- Filing Jurisdiction: Filed in the state of the contributor’s primary residence
- Filing Content: Identifies the specific equity/proceeds being secured
- Amendment Filings: Filed when promissory notes are fractionalized or modified
- Continuation Filings: Filed every five years to maintain the security interest
- Termination Filings: Filed when obligations are fully satisfied
🔍 Blue Sky Law Compliance
We address state securities regulations through a comprehensive approach:
- State-by-State Analysis: Regular review of state requirements where members reside
- Notice Filings: Filed in states requiring notification of exempt offerings
- Fee Payment: Timely payment of required state filing fees
- Renewal Requirements: Compliance with state-specific renewal requirements
- Exemption Tracking: Documentation of applicable exemptions in each jurisdiction
- Legend Requirements: Inclusion of required legends on offering documents
📋 Company Transfer Approvals
A key advantage of our model is the way we handle company transfer restrictions:
- No ROFR Issues: No company approval or Right of First Refusal (ROFR) requirement because we’re not actually transferring shares
- Proceeds Only: The employee simply promises to transfer proceeds from the sale of shares in the future
- Flexibility: This approach sidesteps many of the traditional obstacles to secondary sales
- Right to Assign: Promissory notes specifically include the village’s right to assign interests
- Documentation Review: Regular review of company bylaws and equity agreements to confirm compliance
🔄 Rebalancing Transactions
Our rebalancing approach has been carefully structured:
- Fractionalized Promises: Rebalancing may involve selling fractions of promises into the Super Fund
- Securities Treatment: These fractionalized promises are treated as securities for compliance purposes
- Accredited Investors: They are sold only to accredited investors who buy units of the Super Fund
- Documentation Trail: Complete paper trail of all fractionalization and transfers
- Valuation Documentation: Independent valuation support for transaction pricing
💲 Pricing Methodology
We employ a robust methodology for valuing private company shares:
- Share Price Reference:
- Last public round (e.g., Series C at $1/share)
- If no new round, average of recent secondary trades on recognized platforms
- Where applicable, time-adjusted market index data for additional validation
- Valuation Committee: Independent committee reviews and approves all valuations
- Documentation Standards: Comprehensive records supporting all valuation decisions
- Periodic Reassessment: Regular review and updating of valuations
🛡️ Anti-Money Laundering Compliance
Backerville maintains a comprehensive AML program:
- KYC Procedures: Thorough identity verification for all members and investors
- Source of Funds: Verification of the source of Super Fund investments
- Transaction Monitoring: Ongoing monitoring for suspicious activities
- Reporting Requirements: Compliance with applicable reporting obligations
- Training Program: Regular training for all Backerville personnel
🔒 Data Privacy & Security
To protect member information:
- Privacy Policy: Comprehensive policy governing data collection and use
- Security Measures: Robust encryption and access controls
- GDPR Compliance: For European participants
- CCPA Compliance: For California residents
- Breach Response Plan: Procedures for addressing any security incidents
⚖️ Dispute Resolution Framework
We’ve established clear processes for resolving disputes:
- Mediation First: Initial disputes addressed through mediation
- Binding Arbitration: If mediation unsuccessful, matters resolved through arbitration
- Venue Selection: Predetermined venue for legal proceedings
- Fee Allocation: Clear rules for allocating dispute resolution costs
- Representation Rights: Member rights to representation in disputes
📊 Ongoing Compliance Management
Backerville maintains continuous compliance through:
- Annual Compliance Reviews: Comprehensive review of all legal requirements
- Regulatory Updates: Monitoring of changes in applicable laws and regulations
- Member Communication: Regular updates on compliance matters affecting members
- Third-Party Audits: Periodic independent review of compliance programs
- Documentation Maintenance: Secure centralized system for all compliance documentation
This comprehensive legal framework provides the foundation for a compliant, sustainable platform that protects all participants while enabling the innovative benefits of the Backerville system.