Yesterday we had the opportunity to attend the Invest Mississippi Crowdfunding Seminar put on by the Mississippi Secretary of State which went over the new crowdfunding rules set to become effective May 26, 2015. This is important to Mississippian entrepreneurs for a number of reasons. First, the crowd funding rules create new opportunities to cost effectively access equity funding through the internet. Second, while there are still a number of requirements and limitations, this new process is less restrictive and should be a less expensive alternative to federal registration pursuant to Rule 504 of the SEC regulation D, 17 CFR Section 230.504. Third, these new rules are expected to create new investment opportunities for Mississippians looking to invest their money locally.
Although the new rules are specifically intended to simplify the procedure for raising smaller amounts, what is small to some is still a lot of money to others. Under the new rules, during any 12-month period a Mississippi business may raise up to $1 million from both residents and non-residents of Mississippi, or up to $2 million by soliciting investments from Mississippi residents only.
While new procedure is relatively straightforward, there are a many things that may impact the effectiveness of crowdfunding in your specific situation. For example, there is a requirement that at least 50% of the offering amount must be raised by the deadline stated in the Offering form or the money raised is refunded. Another is the requirement that at least 80% of the funds raised must be used in the State of Mississippi. And perhaps the most significant requirement or limitation deals with advertising or marketing.
Under the new rules, all crowdfunding offerings must be made via specific website portals approved by the Secretary of State. Only a very limited announcement may be made in any other media and all other communications must be conducted through the registered website portal. So getting your particular business plan in front of potential crowdfunding investors may be the most significant challenge.
The Secretary of State has much more information available on its Crowdfunding page.
If you would like to discuss how one of our lawyers could help you access funding under this new vehicle, contact us to set up a meeting. For more information on our business and corporate legal services click here.