Roughly 17 U.S. states have enacted laws exempt intrastate crowdfunding within state lines for issuers and investors. California, the largest state, may be coming on board very soon.
Two separate bills are moving through the California legislature and could reach the Governor’s desk by the end of summer 2015. Both bills live up to the California’s reputation as cutting edge..
LESA creates crowdfunding exemptions for the following:
California crowdfunding Small Investments exemption:
For offerings of less than $500,000 with basic financial disclosure.
Non-accredited investors capped at $1,000 per deal, and accredited investors at 5% of their net worth.
California crowdfunding Small Farms and Agricultural Land Trusts exemption:
Small farm enterprises or agricultural land trusts can raise up to $2 million for the purchase, lease or improvement of property for agriculture purposes. An issuer must be majority controlled by people actively engaged in the farm enterprise or controlled by a nonprofit public benefit corporation.
Investors are capped at $1,000 per deal; “qualified purchasers” (net worth of $250,000 or more and annual income of $100,000 or more) may invest as much as $5,000. Accredited investors are capped at no more than 5% of their net worth.
California crowdfunding Renewable Energy Projects exemption:
Nonprofits, mutual benefit corporations, and cooperatives can raise up to $2,000,000 to finance the purchase of solar panels or wind turbines.
Investors are capped at $1,000 per deal; “qualified purchasers” (net worth of $250,000 or more and annual income of $100,000 or more) may invest as much as $5,000.
Raises the cap for eligibility under an existing state law that exempts any offer or sale of a membership in a California consumer cooperative corporation from securities regulations. Currently to be eligible, the offering must not exceed $300 per purchaser. That is raised to $1,000 per purchaser.
The California Crowdfunding Bill (AB 722) proposes the following:
Companies can raise up to $1 million
Investors are capped at $5,000 or 10 percent of the investor’s net worth, whichever is less
No intermediary portal required
Bans telephone solicitation, but otherwise allows companies to directly reach out to investors
Companies must perform a suitability check on investors
Offerings are reviewed by the state’s Dept. of Business Oversight, which promises a 60-day review
No crowdfunding portal is required
A fee of .4 percent of the offering amount is collected by the state’s DBO
Offerings must comply with Reg D, Rule 504