Maine’s Crowdfunding Goes Live
On January 1, 2015, Maine’s crowdfunding rule went effective. Maine enacted 2014 P.L. Ch. 452 “An Act to Increase Funding for Start-ups” (referred to as Maine’s “crowdfunding law”) on March 2, 2014, but companies in Maine have been waiting to raise capital under the new law until Maine’s Office of Securities published a final rule setting forth details for implementation. With the recent adoption of Rule 523, “Rule Regarding Short-Form Seed Capital Registrations,” Maine-based companies have a new avenue to raise up to $1 million in capital from investors located within the state of Maine and, in some instances, from certain types of investors around the country (assuming compliance with the securities laws in each investor’s state of residence).
A company seeking to take advantage of Maine’s new crowdfunding law must meet certain conditions, including, but not limited to, the following:
- Have a principal place of business in Maine
- Cap its overall capital raise at $1 million in a 12-month period
- Limit each sale to a non-accredited investor to $5,000 in a 12-month period (note that accredited investors are not subject to the $5,000 limitation)
- Meet the federal exemption for limited offerings under Regulation D, Rule 504
- Neither the company nor key persons involved with the company can be subject to “bad actor” disqualification
- Pay a fee and file a short-form registration statement with the Maine Office of Securities that, among other information, includes the following:
- Financial statements (note that offerings between $500,000 and $1 million must be audited)
- Capitalization table
- Business plan
- Risk factors
- Deliver offering materials to prospective investors
- Enter into a subscription agreement with each investor
- Escrow/segregate funds until the minimum offering amount is met (note that the minimum offering amount must be at least 30% of the maximum offering amount)
Raising or investing capital generally involves a complex interplay of federal and state securities laws and regulations, as there are many different ways to legally raise and invest capital. We encourage you to think carefully and consult as appropriate with legal counsel, tax experts and accounting advisers.
This alert is the first of several that will be focused on various aspects of crowdfunding. Stay tuned for the next publication.
For more information or questions about crowdfunding, contact Joel Shaw at 207 228-7308 or email@example.com or Helen Sterling Coburn at 207 228-7284 or firstname.lastname@example.org. As experienced business and securities counsel and members of Bernstein Shur’s Private Capital Team, they advise operating companies, private funds, family offices and individuals seeking to raise and invest capital.