Does your company offer a finder's fee for locating investors? If so, you may find that your finder's fee agreement may not be enforceable, a new article at Inside Counsel warns.
Companies that seek to raise money through a private securities offering routinely dole out finder's fees, attorney Randy Johnson writes for Inside Counsel. Finder's fees are usually determined by how much money the finder's efforts bring in for the company.
But a legal issue arises when the finder is not properly licensed as a broker-dealer. In that case, the finder's fee agreement "is an illegal contract and is likely unenforceable," Johnson writes for Inside Counsel.