Sunday, May 18, 2014
Texas Intrastate Crowdfunding Law: How will it Work
Texas will soon have its own crowdfunding law. I recently blogged on the proposed rules which you can see here. While the JOBS act works its way through the SEC, states are passing their own version of crowdfunding. It's currently thought that the SEC will need until first quarter of 2015 to finalize the federal version of the JOBS act. These intrastate offerings as they are called seek to reduce the cost of raising funding. Under the proposed rules, a company can raise up to $1M per year from non-accredited investors who can invest up to $5000 per person in any one year. There's no limit on accredited investor investments. The startup raising funding must have 80% of their assets and revenues located in Texas and their principle office must be here as well. The startup must raise funds through a registered Texas Crowdfunding portal and the funds must be escrowed in a bank under the laws of Texas.
The startup must post on the portal the offering which usually includes a description of the offering, the business plan, the use of funds, the management team, and owners of the business with more than 20%. The startup must provide current financial information but the CEO need only certify it, rather than provide audited financials.
All communications about the offering must be made through the portal and captured for all investors to view. Only Texas-based investors can view the offering. Typical forms of verification include a drivers license, a voter registration card, or tax records.