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KS, GA, NC and WA look to Increase Small Business Capital Using Securities Exemptions

June 12, 2013

Since 2011, three states (Kansas, Georgia and North Carolina) have enacted securities exemptions that allow their state's entrepreneurs and small businesses to raise up to $1 million dollars via the sale of securities to residents of the state — Washington lawmakers introduced similar legislation in 2013 session where it is still pending. These exemptions, commonly referred to as crowdfunding exemptions, are intended to increase the pool of investors for small businesses by allowing them to publicly offer securities without having to spend the significant time and cost associated with registering a sale of securities with the state

The enacted exemptions from Kansas, Georgia and North Carolina as well as the proposed legislation in Washington share several similarities including:

  • All states require that the issuer be a business/organization formed under the laws of the state.
  • All state allow issuers to use a state-regulated broker dealer/funding platform, but it is not required.
  • All States require all investors to be a resident of the state; North Carolina and Washington also require the issuer to receive evidence of the investor's residency.
  • In Kansas, Georgia and Washington, capital raised via the sale of securities cannot exceed $1 million over a 12-month period. North Carolina allows up to $2 million with audited financials.

There are two areas that differ from the older exemptions (Kansas and Georgia) and the exemptions proposed in 2013 (North Carolina and Washington) include:

  • In North Carolina and the proposed Washington exemption, investors are required to certify in writing by the time of sale they understand the risks of unregistered securities.
  • In Georgia and Kansas, all funds received must be deposited into a bank or depository institution authorized to do business in the state.

The most significant difference between each exemption lies in the areas of invesment caps for non-accredited investors and when the issuer must send notice to the state:

  • In Kansas, investment is capped at $1,000 dollars from any single investor, unless they are accredited, and they must notify the state before the public solicitation or the twenty-fifth non-public issuance of a security.
  • In Georgia, investment is capped at $10,000 dollars from any single investor, unless they are accredited, and they must notify the state before the public solicitation or the twenty-fifth non-public issuance of a security.
  • In North Carolina, investment is capped at $2,000 dollars from any single investor, unless they are accredited, and they merely notify the state before a public solicitation.
  • The proposed Washington legislation would allow up to a $2,000 dollar investment from those with a net worth of less than $100,000 and up to 10 percent of their annual income/net worth for those that make $100,000 or more. Issuers must file within 15 days of the first issuance and pay a $300 fee.

During this month's Inspiring Thought webinar, SSTI is proud to be joined by representatives from the Kansas Office of the Securities Commissioner as they discuss the Invest Kansas Exemption — the first of these exemptions to be enacted. Register Today!

Georgia, Kansas, North Carolina, Washingtoncapital