Washington D.C. - Crowdfunding is becoming more and more popular for small businesses because it allows them to raise capital directly from many individuals via the internet. As of last week, the Securities and Exchange Commission adopted final rules to facilitate smaller companies’ access to capital through Title IV of the Jumpstart Our Business Startups (JOBS) Act.
The updated exemption will now allow both accredited investors and everyday people to invest in smaller companies who are raising funds through equity or debt based crowdfunding. Companies will be able to sell up to $50 million of securities in a 12-month period, subject to eligibility, disclosure and reporting requirements.
“These new rules provide an effective, workable path to raising capital that also provides strong investor protections,” said SEC Chair Mary Jo White. “It is important for the Commission to continue to look for ways that our rules can facilitate capital-raising by smaller companies.”
The final rules, often referred to as Regulation A+, provide for two tiers of offerings: Tier 1, for offerings of securities of up to $20 million in a 12-month period, with not more than $6 million in offers by selling security-holders that are affiliates of the issuer; and Tier 2, for offerings of securities of up to $50 million in a 12-month period, with not more than $15 million in offers by selling security-holders that are affiliates of the issuer. Both Tiers are subject to certain basic requirements while Tier 2 offerings are also subject to additional disclosure and ongoing reporting requirements.
For Startups & Small Businesses
· You can now generally solicit and advertise publicly
· Only accredited investors can actually invest in generally solicited companies
· File Form D with the SEC before you begin soliciting, letting them know you will
· Disclose details about your general solicitation to the SEC within 15 days from first solicitation
· Strict verifications done by companies are required to confirm that each investor is accredited
· The penalty for not adequately meeting and following general solicitation requirements with the SEC is being banned from fundraising for a full year
For Investors
· Only accredited investors can invest in companies who generally solicit
· Qualifying as accredited means having $1 million in net worth, or making over $200,000 a year for the past 3 years
· Investors will need to prove accredited investors status, which can be done through written confirmation by a CPA, attorney, investment advisor, or Broker-Dealer, or income-related IRS forms
For the complete press release: http://www.sec.gov/news/pressrelease/2015-49.html#.VSLCDvnF_5E
“These new rules provide an effective, workable path to raising capital that also provides strong investor protections,” said SEC Chair Mary Jo White. “It is important for the Commission to continue to look for ways that our rules can facilitate capital-raising by smaller companies.”
The final rules, often referred to as Regulation A+, provide for two tiers of offerings: Tier 1, for offerings of securities of up to $20 million in a 12-month period, with not more than $6 million in offers by selling security-holders that are affiliates of the issuer; and Tier 2, for offerings of securities of up to $50 million in a 12-month period, with not more than $15 million in offers by selling security-holders that are affiliates of the issuer. Both Tiers are subject to certain basic requirements while Tier 2 offerings are also subject to additional disclosure and ongoing reporting requirements.
For Startups & Small Businesses
· You can now generally solicit and advertise publicly
· Only accredited investors can actually invest in generally solicited companies
· File Form D with the SEC before you begin soliciting, letting them know you will
· Disclose details about your general solicitation to the SEC within 15 days from first solicitation
· Strict verifications done by companies are required to confirm that each investor is accredited
· The penalty for not adequately meeting and following general solicitation requirements with the SEC is being banned from fundraising for a full year
For Investors
· Only accredited investors can invest in companies who generally solicit
· Qualifying as accredited means having $1 million in net worth, or making over $200,000 a year for the past 3 years
· Investors will need to prove accredited investors status, which can be done through written confirmation by a CPA, attorney, investment advisor, or Broker-Dealer, or income-related IRS forms
For the complete press release: http://www.sec.gov/news/pressrelease/2015-49.html#.VSLCDvnF_5E
