NEW YORK, May 23, 2019 /PRNewswire/ -- The practice of
crowdfunding — where startups may raise small amounts of money from
a large number of "unsophisticated" individuals through websites
likes SeedInvest and Fundable — has sparked interest from an
increasing number of companies that view it as an enticing way to
raise capital.
The SEC's passage of crowdfunding regulations in 2012
represented a significant change in policy from the Securities Act
of 1933. But startups still need to monitor legal issues associated
with the practice, according to a recent vc-list.com article
written by attorneys Matthew J.
Moisan and Justin G. Lurie
from the New York City office of
national law firm LeClairRyan. Both attorneys represent companies
in all stages of development, with a particular focus on founding
entrepreneurs, tech startups and emerging growth companies.
Historically, startups relied on Regulation D to provide a safe
harbor from certain disclosure requirements. Congress' passage of
the Jumpstart Our Business Startup Act ("JOBS Act")
in 2012, along with its Title III provision, implemented the
regulatory framework necessary for crowdfunding to thrive, they
wrote in a post, Legal Issues in Equity Crowdfunding.
Title III has "certainly opened the door for companies to have
greater access to capital," they note. "But Title III is still in
its infancy and has plenty of critics. Congress has discussed
multiple amendments, the most consequential of which would be to
increase the offering size allowed under Title III. Many detractors
feel that the requirements and restrictions placed on companies
makes equity crowdfunding too expensive to comply with,
specifically when compared with the limitations placed on the
offering size."
In addition to keeping current with new regulations, Moisan and
Lurie advise startups to consider all of their options before
fundraising via crowdfunding. "This is a great tool, but not right
for all companies who must understand their specific needs and
capacity," they caution. "As a newer form of investment,
crowdfunding will undoubtedly be an evolving area of SEC
regulation, so it is important for interested parties to monitor
the newest regulations to remain compliant, and benefit from the
opportunities of this new domain."
The full column is available at:
http://vc-list.com/legal-issues-equity-crowdfunding/
About LeClairRyan
As a trusted advisor, LeClairRyan provides business counsel and
client representation in corporate law and litigation. In this
role, the firm applies its knowledge, insight and skill to help
clients achieve their business objectives while managing and
minimizing their legal risks, difficulties and expenses. With
offices from coast to coast, the firm represents a wide variety of
clients nationwide. For more information about LeClairRyan, visit
www.leclairryan.com.
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