SecProbe.io

CORRESP
1
filename1.htm

CORRESP

 August 30, 2023

VIA EDGAR

 U.S. Securities and Exchange Commission

 100 F Street, N.E.

 Division of Corporation Finance

Officer of Finance

 Washington, D.C. 20549

Attention: Robert Arzonetti and Christian Windsor

Re:
 Beneficient

Registration Statement on Form S-1

Filed July 19, 2023

File No. 333-273326

Ladies and Gentlemen:

 On behalf of Beneficient
(the “Company”), below is the response of the Company to the comments of the staff of the Division of Corporation Finance (the “Staff”) of the United States Securities and Exchange Commission (the “Commission”) set
forth in the Staff’s letter, dated August 10, 2023, regarding the Company’s Registration Statement on Form S-1 (the “Registration Statement”) filed with the Commission on July 19, 2023. In connection with this
letter, an amendment to the Registration Statement (“Amendment No. 1”) has been submitted to the Commission on the date hereof.

For your convenience, the Staff’s comments are set forth in bold, followed by responses on behalf of the Company. Unless otherwise
indicated, all page references in the responses set forth below are to the pages of the clean copy of Amendment No. 1. Capitalized terms used but not otherwise defined herein shall have the meanings assigned to such terms in Amendment
No. 1.

 Registration Statement on Form S-1 filed July 19, 2023

General

1.
 We note that you have incorporated by reference disclosure from your
10-K and other existing Exchange Act filings. Since Beneficient is a successor issuer to a shell company, you do not appear to be eligible to incorporate by reference, and will not be able to do so until three
years after the completion of the business combination. Please refer to General Instruction VII.D of Form S-1 and refer to the Staff Statement on Select Issues Pertaining to Special Purpose Acquisition
Companies issued March 31, 2021. Revise the Form S-1 to provide all disclosure required by the form that currently is incorporated by reference, including, but not limited to the management’s
discussion and analysis, financial statements, risk factors and the description of your business.

 Haynes and Boone, LLP

 2323 Victory Avenue | Suite 700 | Dallas, TX 75219

T: 214.651.5000 | haynesboone.com

 U.S. Securities and Exchange Commission

Division of Corporation Finance

 Office of Finance

August 30, 2023

  Page
 2

 Response: The Company has revised Amendment No. 1 to remove the section
“Incorporation by Reference” and has included the information previously incorporated by reference therein. However, the Company respectfully disagrees with the Staff’s conclusion that the Company’s “predecessor” is a
shell company, and as a result, the Company is ineligible to incorporate by reference.

 Instruction VII.D of Form S-1 provides that a registrant may incorporate by reference if, among other things, the registrant is not and during the past three years neither the registrant nor any of its predecessors was: (a) a blank
check company as defined in Rule 419(a)(2); (b) a shell company, other than a business combination related shell company, each as defined in Rule 405 of Regulation C (“Rule 405”); or (c) a registrant for an offering of penny stock as
defined in Rule 3a51-1 of the Securities and Exchange Act of 1934, as amended. Rule 405 defines predecessor as “a person the major portion of the business and assets of which another person acquired in a
single succession, or in a series of related successions in each of which the acquiring person acquired the major portion of the business and assets of the acquired person.”

The Company believes that the structure of its business combination transaction with Avalon Acquisition Inc., a Delaware corporation
(“Avalon” and such transaction, the “Business Combination”), and related transactions support the determination that the Company is not prohibited from incorporating by reference in a registration statement on Form S-1 because (i) the Company has never been a blank check company, a shell company or a registrant for the offering of penny stock and (ii) Avalon should not be considered a “predecessor” of the
Company.

 The Company believes that the structure of the Business Combination with Avalon is distinguishable from the traditional de-SPAC structures contemplated by the Staff Statement on Select Issues Pertaining to Special Purpose Acquisition Companies issued March 31, 2021. In a traditional
de-SPAC structure, a shell company acquires a target operating company by issuing shares of the shell company’s stock to the holders of the target, and by virtue of such transaction, the shell company
remains the issuer with listed securities and becomes an operating company by succeeding to the business of the target. In an alternative de-SPAC “double dummy” structure, a new holding company with
no operations is formed to facilitate the business combination, and such holding company becomes the listed issuer following the transaction. In both such cases, the listed issuer would have previously been a shell company, other than a business
combination related shell company, as defined in Rule 405.

 By contrast, in the Business Combination, at no point was the company that is
now the listed issuer, Beneficient, a shell company. Prior to closing the Business Combination, the Company had operations and converted from a Delaware limited partnership named “The Beneficient Company Group, L.P.” (“BCG”) into
a Nevada corporation named “Beneficient” (the “Conversion”). Pursuant to the terms of the Business Combination Agreement, dated September 21, 2022, by and among BCG, Avalon, Beneficient Merger Sub I, Inc., a Delaware
corporation and direct, wholly-owned subsidiary of BCG (“Merger Sub I”), and Beneficient Merger Sub II, LLC, a Delaware limited liability company and direct, wholly-owned subsidiary of BCG (“Merger Sub II”), on June 7, 2023,
Merger Sub I merged with and into Avalon (the “Avalon Merger”), with Avalon surviving the Avalon Merger (the “Avalon Merger Surviving Company”) as a wholly-owned subsidiary of the Company (the closing of the Avalon Merger, the
“Closing”). On June 16, 2023, the Avalon Merger Surviving Company merged with and into Merger Sub II (the “LLC Merger”) with Merger Sub II surviving the LLC Merger as a wholly-owned subsidiary of the Company. The Company has
advised us that it intends to dissolve Merger Sub II in due course. Beneficient structured the Business Combination transaction in such fashion for purposes of conforming with provisions in its governing documents concerning a public listing and not
for the purpose of avoiding having been a former shell company.

 U.S. Securities and Exchange Commission

Division of Corporation Finance

 Office of Finance

August 30, 2023

  Page
 3

 In addition, the Company believes that Avalon does not meet the definition of a
“predecessor” of the Company under Rule 405 because the Company did not acquire the “major portion of the business or assets” of Avalon. With respect to the business of Avalon, the stated business purpose of Avalon was to
“effect a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses.” In contrast, Beneficient’s business is to finance transactions that provide mid-to-high net worth individuals and small-to-midsized institutions with early exit solutions
for their alternative asset investments. What limited business Avalon conducted prior to Closing ceased at the Closing and has not continued at Beneficient. Therefore, Beneficient does not believe that it acquired any of the business of Avalon. The
accounting treatment for the Business Combination also supports the conclusion that Beneficient did not succeed to the business of Avalon. Due to the limited business conducted by Avalon, the Business Combination was accounted for as a capital
transaction in substance and not a business combination under ASC 805, Business Combinations (“ASC 805”). As a result, the Company was treated as the accounting acquirer and Avalon was treated as the acquired company for financial
reporting purposes per ASC 805. Accordingly, for accounting purposes, the Business Combination was treated similar to an equity contribution in exchange for the issuance of shares of common stock. Accordingly, the Company does not believe that it
acquired the “major portion of the business” of Avalon.

 Further, the Company believes it did not acquire the major assets of
Avalon pursuant to the definition of “predecessor” in Rule 405. As a special purpose acquisition company, Avalon’s primary asset was its trust account into which the net proceeds of Avalon’s initial public offering were deposited
for the benefit of Avalon’s public stockholders (the “Trust Account”). Immediately prior to the Closing, the value of the Trust Account was approximately $218 million. To satisfy Avalon stockholder redemptions, immediately prior
to Closing, approximately $191 million was removed from the Trust Account to pay such redeeming stockholders. Furthermore, at Closing, Avalon directed that $26.1 million be deducted from the Trust Account to cover transaction expenses,
leaving only $1.8 million, or approximately 0.8% of the assets in the Trust Account immediately prior to Closing, in the Trust Account to be retained by the Avalon Merger Surviving Company following the Closing. Because substantially all of the
assets of Avalon at the time of the Business Combination were used to pay redeeming stockholders and the vast majority of the assets of Avalon following the redemption were used at Closing per Avalon’s direction to pay transaction expenses, the
Company did not acquire the “major assets” of Avalon. Therefore, the Company does not believe that Avalon should be considered the Company’s predecessor for the purposes of determining its eligibility to incorporate by reference under
Instruction VII.D of Form S-1.

2.
 A July 2023 Wall Street Journal article reported that millions of dollars in payments were made from you to
your CEO, Brad Heppner, and his related entities including:

•

 $156.5 million to HCLP Nominees, L.L.C, a Hepner-related financial trust;

•

 $14.2 million to Bradley Capital Company, L.L.C., which was used to pay for a private jet; and

•

 $3.1 million to The Heppner Endowment for Research Organizations, L.L.C. (“HERO”) and Research
Ranch Operating Company, L.L.C. (“RROC”), which are related to the Bradley Oaks Ranch (Mr. Hepner’s ranch).

We also note that you disclose a number of related party transactions with entities that Mr. Heppner has an interest. In order for
investors to better understand the extent of Mr. Heppner’s interest my be different from your shareholders, provide a tabular presentation detailing all payments made to Mr. Heppner as well as to present any rights to payments,
securities or other cash flows that are senior to those of your common shareholders.

 U.S. Securities and Exchange Commission

Division of Corporation Finance

 Office of Finance

August 30, 2023

  Page
 4

 Response: The Company acknowledges the Staff’s comment and has revised the
disclosure on pages 215 to 220 of Amendment No. 1 to include a tabular disclosure describing payments made to Mr. Heppner for his benefit for the periods required to be disclosed in the Form S-1 by
relevant items of Regulation S-K as well as a description of equity interests held by Mr. Heppner or entities in which he has an interest.

3.
 Please provide all of the information required by the applicable provisions of Item 404 of Regulation S-K, including the following:

•

 On page 170 of your annual report on Form 10-K for fiscal year ended
March 31, 2023, you stated that Messrs. Jon and Steven Sabes contributed 1,452,155 shares of GWG’s common stock to a limited liability company (“SPV”) owned by a Related Entity and an entity held by one of the current directors
of Ben Management, the general partner of BCG, in exchange for certain equity interests in the SPV. “Related Entity” or “Related Entities” include certain trusts that are directly or indirectly controlled by your CEO, Brad
Heppner, and those entities are directly or indirectly held by such trusts. Please disclose the names of the Related Entities, Mr. Heppner’s relationship with the Related Entities, and the amount of shares received by each Related Entity,
etc.

•

 On pages 170 to 171 of your annual report on Form 10-K for fiscal year
ended March 31, 2023, you stated that on May 31, 2019, certain trusts included in the ExAlt Plan (the “LiquidTrust Borrowers”) executed a Promissory Note payable to GWG Life for a principal amount of $65.0 million that
matures on June 30, 2023. Please disclose the names of the trusts and the basis on which such trusts are related persons.

•

 On pages 172 of your annual report on Form 10-K for fiscal year ended
March 31, 2023, you stated that on May 15, 2020, you, through your BCC subsidiary, executed a term sheet with the lender, HCLP, a Related Entity, to amend the First Lien Credit Agreement and Second Lien Credit Agreement dated
September 1, 2017 and December 28, 2018, respectively. Please disclose the basis on which HCLP is a related person.

•

 On page 174 of your annual report on Form 10-K for fiscal year ended
March 31, 2023, you stated that in connection with the Second Amended and Restated Agreements, BHI, a Related Entity that owns a majority of the Class S Ordinary Units, Class S Preferred Units, Preferred
A-0 Unit Accounts, Preferred A-1 Unit Accounts, and BCH FLP-1 Unit Accounts issued by BCH, will grant certain tax related
concessions to HCLP as may be mutually agreed upon between the parties. Please disclose the basis on which BHI is a related person.

•

 On page 175 of your annual report on Form 10-K for fiscal year ended
March 31, 2023, under the heading “Relationship with Ben Securities,” you made a general statement that Ben Securities creates various conflicts of interest and incentives because, through your ownership of Ben Securities, you and
your owners and employees receive profit participation, equity incentives or similar benefits, including your CEO, Ben Heppner. Please disclose names of the related persons, and the approximate dollar amount involved in the transactions, etc. as
required by Item 404 of Regulation S-K.

•

 On page 178 of your annual report on Form 10-K for fiscal year ended
March 31, 2023, under the heading “Administrative Services Agreement between Constitution Private Capital Company, L.L.C. (“Constitution”) and Beneficient USA, you stated that Constitution is an entity owned 50.5% by BHI and
49.5% by BMP and that it was acquired by a Related Entity in 1996. You further state on page 20 of your Form 10-K that BMP is owned by certain of your directors and senior employees. Please disclose the
Related Entity that purchased Constitution, the identity and ownership percentages of the directors/employees that own BMP, as well as any relationship between Constitution/BMP and your CEO Brad Heppner.

 U.S. Securities and Exchange Commission

Division of Corporation Finance

 Office of Finance

August 30, 2023

  Page
 5

•

 On page 178 of your annual report on Form 10-K for fiscal year ended
March 31, 2023, under the heading “Relationship with The Heppner Endowment for Research Organizations, L.L.C. (‘HERO’) and Research Ranch Operating Company, L.L.C. (‘RROC’), you stated that HERO and RROC are indirectly
owned by a Related Entity. Please disclose the Related Entity, any relationship between the Related Entity and your CEO, Brad Heppner.

•

 On page 179 of your annual report on Form 10-K for fiscal year ended
March 31, 2023, under the heading “Relationship between Ben and Hicks Holdings LLC,” you stated that Hicks Holdings LLC, an entity associated with one of your current directors, is one of the owners and serves as the manager of a
limited liability company and that a Relat