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A private company can issue a new class of shares to outside investors, recorded as tokenized interests on its own register, without forming a new entity. The charter and existing stockholder agreements decide whether it can.
The company stays the issuer, and it sells shares in itself. In the usual structure, a new class of non-voting shares is created for the raise, by the board under authority the charter gives it or by a charter amendment the stockholders approve, and the tokenized interest is the record of who holds those shares in book-entry form.
For a Delaware corporation, a new class must be authorised by the certificate of incorporation, either in its text or through a certificate of designations the board files under authority the certificate gives it (DGCL §151), or added by amendment (DGCL §242). Section 224 permits the stock ledger to be kept on electronic networks or databases, including distributed ledgers.
A primary issuance by the company is the clean case. A sale of shares that founders, employees or early investors already hold is a different transaction: it is harder, because each holder is a seller and the company's transfer restrictions apply to them.
The investor would hold shares of the new class, recorded in their own name on the company's register, with the rights the charter gives that class and transfers restricted by the share terms and by securities law. They would own equity in the company, not a contract that tracks it.
Shares sold in a Rule 506(c) offering (17 CFR 230.506(c)) are restricted securities (Rules 502(d) and 144(a)(3)). Resale generally waits for a Rule 144 holding period or another exemption.
Four things decide it, and the company and its counsel check each one before anything is issued.
Where the charter, the stockholder agreements and any transfer agent arrangement allow it, a company can move its existing register on chain without a new raise, and the holders keep their shares and every right attached to them.
The steps run in this order. How long each one takes depends on the company, its charter and stockholder agreements and the issuer's own counsel, so none has a set duration.
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Yes. The company issues shares in itself, usually a new non-voting class, and the tokenized interest records who holds them. No new vehicle is needed.
Shares of the new class, recorded in the investor's name on the company's register, with the rights the charter gives that class and transfer restrictions under the share terms and securities law.
Often Rule 506(c) of Regulation D, which allows general solicitation if every purchaser is accredited and the issuer takes reasonable steps to confirm it. The company's own counsel chooses the exemption.
That is a secondary sale, a separate and harder transaction. It depends on the company's transfer restrictions, rights of first refusal and the resale rules for each holder's shares.
The charter, preemptive rights, rights of first refusal, protective provisions and investor consent rights. The company and its counsel read them first, before any offering terms are set.
Yes, where the charter, the stockholder agreements and any transfer agent arrangement allow it. The holders keep their shares and rights; what changes is where the register of who owns what is kept.
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