In October 2013, the Securities and Exchange Commission (“SEC”) published proposed guidelines related to raising capital for small businesses. Below are highlights of the proposed rules:
SEC registration exemption would apply to:
- Companies raising up to $1 million during any 12-month period;
- Maximum investment equal to the greater of $2,000 or 5% of annual income for those earning under $100,000;
- Maximum investment equal to the greater of 10% of annual income or 10% of net assets for those earning $100,000 or more, provided the total investment does not exceed $100,000;
- Companies make certain disclosures, such as majority stake holders and other material information, in their offering documents;
- Crowdfunding offerings must be issued through an intermediary registered with the SEC, e.g. internet portal, investment bank, or broker-dealer.
The SEC is accepting comments on these proposed rules until January 2014. Small business owners and startups should be on the lookout for the final rules in early 2014.
Once the final rules have been issued, we at The Burrell Law Firm will post a summary of the potential positive impacts for entrepreneurs seeking to raise capital. Contact us for a consultation.