Raise Money with Equity Crowdfunding

Title III of the JOBS ACT creates a Federal exemption under the securities laws to allow raising capital for projects by offering and selling securities through Crowdfunding. On October 30, 2015, the Securities and Exchange Commission adopted the final rules to allow this type of Crowdfunding (Equity Crowdfunding). The rules will be effective 180 days after publication in the Federal Register.


Companies who would like to raise money through Equity Crowdfunding can raise a maximum aggregate amount of $1 million.

During a 12-month period, the aggregate amount of securities sold to an investor through all crowdfunding offerings may not exceed $100,000.


Not eligible companies

Following are some of the companies who are not eligible to use this exemption:

  • Non-U.S. companies,
  • Exchange Act reporting companies,
  • certain investment companies,
  • companies that are subject to disqualification under Regulation Crowdfunding,
  • companies that have failed to comply with the annual reporting requirements under Regulation Crowdfunding during the two years immediately preceding the filing of the offering statement, and
  • Companies that have no specific business plan or have indicated that their business plan is to engage in a merger or acquisition with an unidentified company or companies.

Disclosure Requirements

Companies issuing securities must file certain information with the SEC and provide this information to investors and intermediaries. These disclosures include:

  • the name, legal status, physical address and website address of the issuer;
  • the names of the directors and officers, and each person holding more than 20% of the shares of the issuer;
  • a description of the business of the issuer and the anticipated business plan of the issuer;
  • a description of the financial condition of the issuer;
  • a description of the stated purpose and intended use of the proceeds of the offering sought by the issuer with respect to the target offering amount;
  • the target offering amount, the deadline to reach the target offering amount and regular updates about the progress of the issuer in meeting the target offering amount;
  • the price to the public of the securities or the method for determining the price; and
  • a description of the ownership and capital structure of the issuer.

These disclosures must be filed with the SEC using new Form C, which requires certain disclosures to be presented in a specified format.

Ongoing Reporting Requirements

The company is required to file an annual report with the SEC, no later than 120 days after the end of the fiscal year covered by the report. Financial statements certified to be true and complete in all material respects by the principal executive officer of the company  must be included on the report. If financial statements that have been reviewed or audited by independent certified public accountants are available, the company must provide them and will not be required to have the officer’s certification.

Also, the company is required to disclose information in the report about the company and its financial condition, as required in connection with the offer and sale of the securities. The annual report must be posted on the company’s website.

Not reaching the goal

If a company does not reach its designated fundraising goal, then it does not keep any of the money raised. The sum of investment must be equal or greater that the target offering, otherwise no securities will be sold in the offering and the investments commitments will be cancelled and commitments funds will be returned.

Advertising Forbidden

Advertising of the terms of the offering must be done only through an advertising notice. This notice can only include the following:

        1. a statement that the issuer is conducting an offering, the name of the intermediary, and a link of the intermediary’s platform.
        2. The terms of the offering:
          • Amount of securities offered,
          • Nature of the securities,
          • price of the securities, and
          • closing date of the offering period.
        3. Factual information about the legal identity and business location of the issuer, limited to name, address, phone number, website, representative’s e-mail address, and brief description of the business.

Additionally, a company is not allowed to compensate or commit to compensate, directly or indirectly, any person to promote the offering outside of the communication channels provided by the intermediary.


Investors do not need to be accredited. Investors are limited in the amount of money they can invest. Over a period of 12-months, individual investors are allowed to invest in the aggregate across all crowdfunding offerings as follows:

Investors with annual income or net worth less than $100,000, the greater of:

        • $2,000 or
        • 5% of the lesser of their annual income or net worth.

Investors with annual income or net worth equal to or more than $100,000:

        • 10% of the lesser of their annual income or net worth.

Securities purchased through crowdfunding generally could not be resold for one year.

The following chart provides some examples of investment limits:

Investor Annual Income

Investor Net Worth Calculation Investment Limit *



Greater of $2,000 or 5% of $30,000 ($1,500)




Greater of $2,000 or 5% of $80,000 ($4,000)




10% of $100,000 ($10,000)




10% of $200,000 ($20,000)


$1,200,000 $2,000,000 10% of $1,200,000 ($120,000), subject to $100,000 cap



* This “Investment Limit” column reflects the aggregate investment limit across all offerings within a 12-month period. Here is a calculator you can download to check the limits as an investor.

Helpful Links

  1. MNvest: Equity Crowdfunding in Minnesota
  2. http://www.sec.gov/news/pressrelease/2015-249.html
  3. http://www.entrepreneur.com/article/252315
  4. http://troygould.com/wp-content/uploads/2015/11/274949.pdf
  5. http://venturebeat.com/2015/11/02/the-secs-new-685-page-crowdfunding-rules-what-you-need-to-know/
  6. http://www.nytimes.com/2015/10/31/business/dealbook/sec-gives-small-investors-access-to-equity-crowdfunding.html?_r=0
  7. Business Ownership: Crowdfunding to Raise Capital

Author: Eduardo I. Aburto, Law Clerk.

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