Following the April 2, 2020 virtual meeting of the SEC Small Business Capital Formation Advisory Committee in which the Committee urged the SEC to ease crowdfunding restrictions to allow established small businesses to quickly access potential investors (see HERE), the SEC has provided temporary, conditional expedited crowdfunding access to small businesses. The temporary rules are intended to expedite the offering process for smaller, previously established companies directly or indirectly affected by Covid-19 that are seeking to meet their funding needs through the offer and sale of securities pursuant to Regulation Crowdfunding.
The temporary rules will provide eligible companies with relief from certain rules with respect to the timing of a company’s offering and the financial statements required. To take advantage of the temporary rules, a company must meet enhanced eligibility requirements and provide clear, prominent disclosure to investors about its reliance on the relief. The relief will apply to offerings launched between May 4, 2020 and August 31,
On February 28, 2017, the SEC released a white paper on Regulation Crowdfunding, which law went into effect on May 16, 2016. Regulation Crowdfunding had been long in the making, with the JOBS Act having been passed on April 5, 2012, and the first set of proposed crowdfunding rules having been published on October 23, 2013. Regulation Crowdfunding provides the rules implementing Section 4(a)(6) of the Securities Act of 1933 (the Securities Act). For a summary of Regulation Crowdfunding, see my blog HERE.
From the time the SEC published the final Regulation Crowdfunding rules and regulations on October 30, 2015, the regulatory framework has met with wide criticism. The most commonly repeated issues with the current structure include: (i) the $1 million annual minimum is too low to adequately meet small-business funding needs; (ii) companies cannot “test the waters” in advance of or at the initial stages of an offering; and (iii) companies cannot currently use a Special Purchase