If you are tired of reading and hearing about HB2, there is more news of interest to startups and investors coming from the North Carolina General Assembly.

Three Republican Senators have filed a crowdfunding bill as part of a larger economic development package for North Carolina, sparking hope that legislation opening up investments to the masses and provide more capital to startups may become a reality.

A similar measure also has been introduced in the House.

Senators Rick Gunn, Ralph Hise and Harry Brown are the “primary sponsors” of the bill titled “Prosperity & Econ. Opportunity For All N.C. Act.” or Senate Bill (SB) 826.

More than 20 House members are listed as sponsors of its bill (HB 1090).

The bills also spell out details for a $100 million “Small Business Venture Fund” as well as initiatives for creating a statewide entrepreneurial organization and university startup/technology commercialization. (See links with this post.)

The wide-ranging Senate bill was filed on Tuesday but wasn’t noticed until Wednesday by an avid crowdfunding issue backer who sent a heads-up email to WTW.

WTW has reached out to two legal experts to get their analysis of the bill. They promise feedback but only after reviewing the proposed legislation in detail.

The Senate bill was formally introduced Wednesday and referred to the Commerce committee. If approved there, the bill goes on to appropriations, according to the General Assembly website. It also has made initial movement in the House.

Previous crowdfunding legislation has received bi-partisan support and also has been backed aggressively by Gov. Pat McCrory as well as the state’s Commerce department.

However, other issues keep getting in the way, pushing the state farther behind others that have embraced the concept of enabling the less affluent to make equity investments.

Inside the bill

There are limits placed on the funding.

Investments are limited to $5,000 per individual over a 12-month period, the bill states.

A couple of other highlights on limits from the bill:

  • “One million dollars ($1,000,000), less the aggregate amount received for all sales of securities by the issuer made in reliance upon this exemption within the 12 months before the first offer or sale made in reliance upon this exemption, if the issuer has not undergone and made available to each prospective investor and the Administrator the documentation resulting from a financial audit or review with respect to its most recently completed fiscal year and meeting generally accepted accounting principles.
  • “Two million dollars ($2,000,000), less the aggregate amount received for all sales of securities by the issuer made in reliance upon this exemption within the 12 months before the first offer or sale made in reliance upon this exemption, if the issuer has undergone and made available to each prospective investor and the Administrator the documentation resulting from a financial audit or review with respect to its most recently completed fiscal year and meeting generally accepted accounting principles.”

Proceed at your own risk

And it contains this warning (the text in all caps is as presented in the bill):

“The issuer shall display the following legend conspicuously on the cover page of the disclosure document:

“IN MAKING AN INVESTMENT DECISION, INVESTORS MUST RELY ON THEIR OWN EXAMINATION OF THE ISSUER AND THE TERMS OF THE OFFERING, INCLUDING THE MERITS AND RISKS INVOLVED. THESE SECURITIES HAVE NOT BEEN RECOMMENDED BY ANY FEDERAL OR STATE SECURITIES COMMISSION OR REGULATORY AUTHORITY. FURTHERMORE, THE FOREGOING AUTHORITIES HAVE NOT CONFIRMED THE ACCURACY OR DETERMINED THE ADEQUACY OF THIS DOCUMENT. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. THESE SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED BY SUBSECTION (E) OF SEC RULE 147, 17 C.F.R. § 230.147(E) AS PROMULGATED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND THE APPLICABLE STATE SECURITIES LAWS, PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM. INVESTORS SHOULD BE AWARE THAT THEY WILL BE REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS INVESTMENT FOR AN INDEFINITE PERIOD OF TIME.”

Read the bill at:

https://legiscan.com/NC/text/S826/2015