The Michigan crowdfunding exemption, which went into law in 2013, altered Michigan’s securities act to offer an exemption from registering under the existing securities law, for a company’s sale of its securities, specifically sales of securities through equity crowdfunding web portals.
In the brief period that the Michigan crowdfunding bill has been in effect, the SEC has restricted the use of social media to advertise Michigan crowdfunding efforts, which may have a drastic effect on participation in crowdfunding under the new bill. Michigan does continues to be at the forefront of developing a crowdfunding system that may provide an alternative source of financing for businesses, while keeping the investment capital within the state.
Michigan crowdfunding took a sizable hit when new compliance and disclosure interpretations were released. In order to take advantage of MILE, all transactions must also abide by the intrastate exemption rules.
One of the original proposed benefits of crowdfunding would be the ability of a company to publicly sell its equity largely through social media. The use of social media has been a pivotal part of traditional donations crowdfunding like GoFundme.com. The SEC stated that, since it is likely that an investment offering which uses social media for possibly reach investors outside located outside the state, it would no longer qualify under the state exemption. Losing that exemption would require the company to register its securities with the SEC, which would expose the company to significant fees, costs and ongoing compliance requirements.
As we learn more about eMichigan crowdfunding, there will be more chances for Michigan residents to invest in their local businesses. With ongoing support from the legislature, Michigan crowdfunding could definitely develop into a viable option that could help businesses thrive, while helping keep capital and jobs in the state.