After more than a year of lobbying, the Illinois Crowdfunding Bill was passed in May 2015. In an unusual show of true bipartisan action, legislation was passed unanimously by both the House and the Senate. The Bill moved to the Governor’s desk for signing and there is now much anticipation around businesses and investors in Illinois as the new age of Illinois Crowdfunding begins.
What the Illinois crowdfunding bill does:
The new Illinois Crowdfunding Bill established an exemption to allow investment crowdfunding between Illinois companies and Illinois residents, allowing average residents more alternatives to Wall Street investing. Moreover, in contrast to other methods of equity crowdfunding limited only to accredited investors (e.g. $200k in earnings and $1 ml in net worth), this new bill allows any state resident to invest.
For those who are not aware of crowdfunding in general, equity crowdfunding operates in a similar fashion to the donation fundraising campaigns you see on GoFundMe, except that with equity crowdfunding, the investor who commits funds actually receives debt of/an ownership stake in the company in exchange for their funds. Put succinctly, this newly passed bill allows ANY Illinois resident to invest their money in an Illinois company in exchange for debt or equity in the company, an exciting alternative to 401ks and Wall Street investing.
Similar crowdfunding regulations exist in around 16 other states. However, Illinois’ bill will become one of the most competitive state crowdfunding regulations in the country.
Highlights of the bill include:
- $1,000,000 funding cap unless the Issuer has made available to prospective purchasers audited financial statements, in which case the funding cap will be $4,000,000. – See subsection (2)
- Max amount received by an issuer from any particular purchaser (other than accredited investors) is limited to $5,000 per year. – See subsection (3).