In the last few years, two important shifts have happened in the local and national securities space that make it easier for companies to take part in pitch events without fear. The one that has garnered the most attention operates at the federal level. The JOBS Act, passed on April 5, 2012, has now made it legal for young companies without a stable of rich uncles to advertise a securities offering to any high-net worth individual, so long as the company verifies that all the investors in the round are actually accredited.
JOBS Act: What Does This Mean for Pitch Events?
Now, if a company accepts the added administrative burden of verifying investor eligibility (and limiting the offering to only accredited investors), it can pitch an investment offering to anyone, including the general public. However, only high net-worth individuals are permitted to invest – even if interested investors are in the room who do not meet the accredited standards.
But What About Everyone Else?
At the local level, some states are relaxing the general solicitation ban even further to permit companies to advertise an investment offering to the general public – and more importantly – to actually sell securities to the 97% of the public who are not considered high net-worth individuals. Currently, 14 states (and growing) have updated securities regulations to allow the middle class to invest in local companies. Georgia is one of them. Startups and small businesses in these states have an unprecedented opportunity to both advertise their funding needs and actually garner investors, now that the investor pool has expanded to include all investors, regardless of income.
For more information on rules in Georgia read: Georgia Intrastate Crowdfunding
If you are interested in more detail related to your situation it is best to speak with an attorney.
Megan K. Johnson is a business lawyer with over 7 years of experience. She helped champion securities crowdfunding at the local level and worked with the first company to successfully close an equity crowdfunding involving everyday investors. She is a partner at Founders Legal and can be reached at [email protected]
Source: Smartup Legal