This week, the Small Business Capital Formation Committee of the Business Law section of the ABA submitted their proposals on the three bills currently in front of Congress regarding Crowdfunding. The committee is composed of business lawyers advising early-stage business ventures who seek to make the Proposal more usable by small businesses while providing adequate protection to investors.
The three bills in front of Congress are:
1) the JOBS Act- Jumpstart Our Business Startups (HR 3606)
2) S-1791 Democratizing Access to Capital Act
3) S-1970 Capital Raising Online While Deterring Fraud and Unethical Non-Disclosure Act- Crowdfund Act
The House and Senate versions all vary slightly, and hopefully the suggestions from the Small Business Capital Formation Committee will help reconcile the differences before becoming law.
The commitee reccomends that the limitation to an aggregate offering amount of $500,000 over a 12 month period be raised to $1 million.They suggest that amount be increased to $2 million for an issuer who has filed audited financials.
With respect to the use of an intermediary in the Crowdfunding process, the committee suggests they allow an intermediary to serve as a qualified custodian if the intermediary were insured or bonded through an insurance company in an amount, at least 125% of the maximum amount of funds that the intermediary would hold at any one time.
Author: Jennifer Trowbridge, Stoecklein Law Group