
Dan Brecher
Counsel
212-286-0747 dbrecher@sh-law.comCounsel
212-286-0747 dbrecher@sh-law.comWhile everyone was waiting for the Securities and Exchange Commission (SEC) to finalize its equity crowdfunding rules, many states took matters into their own hands. Now that the federal regulations are finally in place, it remains unclear what role intrastate crowdfunding will play.
In total, 28 states have now legalized some form of equity crowdfunding at the local level. Many more, including New Jersey, have proposed legislation that would allow entrepreneurs and small businesses to solicit financing from “everyday” investors, otherwise known as the “crowd.” Under these state laws, issuers can sell securities via the Internet to investors who reside in the same state, subject to certain caps. This is intended to facilitate small businesses in seeking relatively small amounts of capital to establish or grow their companies.
On the state level, Texas has emerged as a leader in crowdfunding. According to Texas Securities Commissioner John Morgan, the state’s crowdfunding law has generated $1.8 million in investments over the course of approximately 18 months. In total, 34 offerings have been made under the law, which allows non-accredited investors to invest up to $5,000 per year and allows businesses to raise up to $1 million from the crowd each year.
To further encourage the use of intrastate crowdfunding for smaller securities offerings, the Texas State Securities Board is considering an amendment that would permit a registered portal to handle investor funds if the funds are held in a segregated account when the maximum offering amount in a crowdfunding offering is $100,000 or less. As detailed in the crowdfunding rule proposal, portals must make certain disclosures to investors regarding the use of the segregated account and are responsible for the prudent processing, safeguarding, and accounting for funds entrusted to the portal by the investors and the issuer.
Given the relative scarcity of traditional funding as compared with earlier decades, crowdfunding presents a unique opportunity for entrepreneurs and start-ups to solicit capital directly from the public. However, despite the rapid adoption of state crowdfunding laws, entrepreneurs and investors have yet to fully buy into the new opportunity, with only 119 offerings having been made under the various states’ crowdfunding laws to date.
Going forward, it will be interesting to see if the finalization of the SEC rules will ultimately provide the “jumpstart” the equity crowdfunding industry needs. So far, less than 25 companies have taken advantage of equity crowdfunding under the JOBS Act regulations that took effect in May.
No Aspect of the advertisement has been approved by the Supreme Court. Results may vary depending on your particular facts and legal circumstances.
Corporate consolidation involves two or more businesses merging to become a single larger entity. The result is often a stronger and more competitive company that can better navigate today’s competitive marketplace. What Is Corporate Consolidation? Corporate consolidation closely resembles a basic merger transaction. The primary difference is that a consolidation creates an entirely new business […]
Author: Dan Brecher
Business law plays a critical role in nearly every aspect of running a successful enterprise, from negotiating a commercial lease to drafting employee policies to fulfilling corporate disclosure obligations. Understanding what is business law and your legal obligations can help your business run smoothly and build productive relationships with clients, business partners, regulators, and others. […]
Author: Dan Brecher
Corporate transactions can have significant implications for a corporation and its stakeholders. For deals to be successful, companies must act strategically to maximize value and minimize risk. It is also important to fully understand the legal and financial ramifications of corporate transactions, both in the near and long term. Understanding Corporate Transactions The term “corporate […]
Author: Dan Brecher
Ongoing economic uncertainty is forcing many companies to make tough decisions, which includes lowering staff levels. The legal landscape on both the state and federal level also continues to evolve, especially with significant changes to the priorities of the Equal Employment Opportunity Commission (“EEOC”) under the Trump Administration. Terminating an employee is one of the […]
Author: Angela A. Turiano
While filing annual reports may seem like a nuisance, failing to do so can have significant ramifications. These include fines, reputational harm, and interruption of your business operations. In basic terms, “admin dissolution for annual report” means that a company is dissolved by the government. This happens because it failed to submit its annual report […]
Author: Dan Brecher
Antitrust laws are designed to ensure that businesses compete fairly. There are three federal antitrust laws that businesses must navigate. These include the Sherman Act, the Federal Trade Commission Act, and the Clayton Act. States also have their own antitrust regimes. These may vary from federal regulations. Understanding antitrust litigation helps businesses navigate these complex […]
Author: Robert E. Levy
No Aspect of the advertisement has been approved by the Supreme Court. Results may vary depending on your particular facts and legal circumstances.
Consider subscribing to our Firm Insights mailing list by clicking the button below so you can keep up to date with the firm`s latest articles covering various legal topics.
Stay informed and inspired with the latest updates, insights, and events from Scarinci Hollenbeck. Our resource library provides valuable content across a range of categories to keep you connected and ahead of the curve.
Let`s get in touch!
Sign up to get the latest from the Scarinci Hollenbeck, LLC attorneys!