JOBS Act Crowdfunding Details
The Crowdfund Act
The Jumpstart Our Business Startups Act (JOBS Act) was passed with bipartisan support by Congress and signed into law by President Obama in April 2012. Following on the success of donation-based crowdfunding, the JOBS Act now enables businesses to solicit securities-based funding from the general public – also known as Business Crowdfunding.
Unlike the Donation Model of crowdfunding on sites like Kickstarter, where people donate to creative projects and does not allow any return on funds invested, securities-based crowdfunding allows investors to receive a financial return through the purchase of equity, debt, or revenue-based securities.
The JOBS Act also expands investment opportunities to non-accredited investors, who have been historically excluded from this process. For the first time in our lifetime, every American will have access to investing in startups and small businesses and sharing in their financial success. Although you cannot take in investment from non-accredited investors yet, sign up to Crowdfunder now and get your deal in front of our active network of Accredited Investors.
Crowdfunder Legislation & Regulatory Leadership
Our team got involved in crowdfunding legislation and regulation early on in November of 2011, as the first crowdfunding legislation was introduced to the House of Representatives, sponsored by Congressmen McHenry. Since then, our management team has been engaged with leadership in Congress, the SEC and the White House.
We’re also founding participants of the crowdfunding industry and trade associations, CFIRA and CfPA.
Key Points of CROWDFUND ACT under The JOBS Act
- A company will be able to crowdfund up to $1 million over a 12 month period.
- Individuals with annual income or net worth of less than $100,000 may invest up to $2,000 or 5 percent of their annual income or their net worth, whichever is greater, over a 12 month period. Individuals with annual income or a net worth of $100,000 or more may invest up to 10% of annual income or net worth, capped at $100,000 maximum aggregate amount, over a 12 month period.
- Investors can fund one company or several companies as long as they remain within these annual limits.
- Minimum Review & Checks: Companies that seek to crowdfund a securities-based round must have background checks done on all principles with 10% or greater ownership in the company and provide full and adequate disclosures with a business plan and a full description of their ownership and capital structure.
- Crowdfunding portals must, alongside the legally required background checks, must do a full review of the company, disclosures and the raise in order to approve a company prior to fundraising.
- An investor must wait a minimum of 12 months before selling her/his securities unless the sale is to a family member, the issuing company, or an accredited investor, in addition to other restrictions normally placed on the transfer of securities.
- A crowdfunding round does not prevent a company from raising capital through other legal channels.
- Companies crowdfunding will be exempt from the 500 shareholder cap pursuant to rules and regulations of the SEC.