Editor’s note: Investor and entrepreneur Mark Easley, one of the driving forces behind the passage of intrastate crowdfunding legislation, spells out how the law will work in a special blog written exclusively at the the request of WRAL TechWire. He also says that N.C. residents can participate in the shaping of final rules – and urges entrepreneurs as well as interested investors to do so.

MORRISVILLE, N.C. – The long awaited North Carolina intrastate investment crowdfunding act, known as the NC PACES Act, was unanimously passed by the NC Legislature and signed into law by the Governor last summer. This new law allows North Carolina based startups and small businesses to raise either debt or equity financing from North Carolina residents, including both accredited and retail investors.

The law is implemented as what is known as a securities law exemption, which means it carves out some special definitions and rules for this particular type of financial offering, including the financial limits and the process for doing fundraising in this way.

One of the key points about the NC PACES Act crowdfunding exemption is that it allows entrepreneurs to create an investment fundraising campaign which can be promoted via the internet on crowdfunding websites and a variety of other ways.

The exemption also allows entrepreneurs to raise up to $2M in financing in any 12 month period if they have reviewed or audited financials from the previous year, or up to $1M if they do not.

The crowdfunding campaign can raise up to $5,000 from any North Carolina adult resident, and an unlimited amount from accredited investors.

These types of investment crowdfunding campaigns using several federal and state crowdfunding exemptions have become very popular and successful over the last couple of years, so now North Carolina is about ready to join over 30 other states that allow this type of intrastate crowdfunding.

This should be a big boost for our small business and startup communities who will be able to raise money in the form of debt (such as revenue share loans) or equity (such as 506 equity offerings) from their friends, customers, and community to open or expand a business and create jobs right here in NC.

NC rules

There is one more step in the implementation process in which you can participate. These securities law exemptions are regulated by the NC Secretary of State. So any new law like this has some securities related rules attached to it to explain and implement the disclosures, registration, reporting, and investor protection parts of the law.

A ‘Public Comment Period’ allows anyone to make formal comments in writing to the Secretary of State’s office to suggest improvements to the implementation of the exemption. The Public Comment Period for the NC PACES Act will run from Feb 7 to Feb 27 2017.

So if you are an entrepreneur or investor that is potentially interested in the investment crowdfunding option, or want to help those who are, please take a little time in the next week or two to review the PACES Act, the proposed rules, and if you have some ideas, provide some written comments to the Securities Division.

Here’s how you can proceed:

1)   Please see the Secretary of State web page regarding the proposed rules for all the links you will need: http://sosnc.gov/legal/ThePage.aspx
2)   Take a quick look at the NC PACES Act. It is kind of dry legal stuff, but it will tell you what the legislature had in mind: http://sosnc.gov/legal/pdf/S_481-PACES_ACT_portions_only.pdf
3)   Take a look at the proposed rules here:http://sosnc.gov/legal/pdf/Proposed%20Rule%20Changes%201-31-17.pdf
4)   If you have any comments, you can send them in writing here:http://sosnc.gov/legal/pdf/How%20to%20make%20a%20public%20commentFinal.pdf

With your help, NC will benefit from a new, well defined investment crowdfunding exemption for our entrepreneurs.