A new Virginia code amendment, effective as of July 1, 2015, makes it easier for small Virginia companies to raise capital by allowing companies to raise up to $2 million through crowdfunding.
The amendment, codified at Virginia Code §13.1-514(21), creates an exemption from the more detailed securities, broker-dealer, and agent registration requirements of the Virginia Securities Act for any security issued by a Virginia entity, as long as the following requirements are met:
- The offering is conducted in accordance with the federal exemption for intrastate offerings in § 3(a)(11) of the Securities Act of 1933 and the SEC Rule 147;
- The offer and sale are made only to Virginia residents;
- The aggregate price of the securities offered does not exceed $2 million;
- The maximum amount invested by a purchaser who is not an accredited investor is $10,000;
- Compensation is not paid to employees, agents or other persons for the solicitation or based on the sale of the securities unless they are registered as a broker-dealer or agent;
- Neither the issuer nor any other related person is subject to disqualification; and
- The security is sold in compliance with the conditions established by the Virginia State Corporation Commission.
To view the Virginia State Corporation Commission regulations, please visit http://law.lis.virginia.gov/admincode/title21/agency5/chapter40/section190/.
The Virginia State Corporation Commission is required to report to the House and Senate on July 1 of each year on the implementation of this new crowdfunding exemption, including (i) updates on federal action; (ii) the number of filings in the Commonwealth made pursuant to this crowdfunding exemption; (iii) the mean, media, and total values related to money raised under offerings made pursuant to this crowdfunding exemption, and (iv) recommendations for revisions.
The state code amendments were effective as of July 1, 2015, and the Virginia State Corporation Commission regulations were effective as of July 31, 2015.
The provisions of this crowdfunding exemption are set to expire on July 1, 2020.