The unregistered sale of securities is illegal, but for a company qualifying for an offering exemption at the state and federal levels. The securities laws require that a company seeking to raise capital must do so in accordance with an exemption. This is the basis of securities laws as applicable to start-up and growth companies seeking to raise money without a registered public offering.
In 2012, the Georgia Commissioner of Securities made it easier for Georgia businesses to raise capital – the rule is called the “Invest Georgia Exemption” or “IGE”. Georgia was only the second state in the Country to implement an “intrastate” crowdfunding exemption. Under the IGE, Georgia organized companies can raise up to $5 million by sales of securities to other Georgia residents. The IGE can be the perfect exemption for companies looking to raise capital within the State of Georgia, with minimal regulatory compliance complications. However, the IGE does not exempt companies from complying with Section 12(g) of the Securities Exchange Act of 1934, the anti-fraud provisions of the federal securities laws, the civil liability provisions of section 12(2) of the Act or other provisions of the federal securities laws.
One of the great features of the IGE is that Georgia businesses can generally solicit sales of securities to both “accredited” and “unaccredited” investors using general solicitation to attract investors. As one of the first crowdfunding exemptions in the country, it is a powerful vehicle for Georgia companies.
Highlights of the IGE, include the following:
• Permits general solicitation of “accredited” and “non-accredited” investors in crowdfunding campaigns, using television commercials, the internet and other media.
• Georgia businesses can raise up to $5 million dollars during any 12 month period.
• Available only to Georgia businesses that are formed under the laws of the State of Georgia and registered with the Georgia Secretary of State.
• Georgia businesses must meet certain revenue, asset and use of proceeds tests under applicable federal regulations, to confirm “intrastate” qualifications.
• Non-accredited investors are capped at $10,000 per campaign. There is no cap for accredited investors.
• Disclosure materials given to investors do not undergo a merit review; only a Notice Filing is required prior to general solicitation or the 25th sale of securities (which is sooner).
• Companies are not required to use a broker-dealer or a Funding Portal to facilitate their crowdfunding campaigns.
• All investments must be deposited in an institution authorized to do business in Georgia.
• Issuer must inform the purchaser that the securities have not been registered and that there are resale restrictions.
• Funds must be deposited in a financial institution which is authorized to do business in Georgia.
The IGE is designed to promote economic development within the State of Georgia as an intrastate exemption. Only Georgia businesses that meet the IGE requirements can rely on its exemption, which may include certain film and television productions, restaurants, retail stores, and other local businesses. Georgia has established itself as a leader in the crowdfunding arena, and Georgia companies focused on doing business in Georgia would be well-served to explore its availability in their capital raising efforts.
Disclaimer: This article should only be used for informational purposes. It does not constitute legal advice, and it does not create an attorney-client relationship with anyone. If you need legal advice, please feel free to contact me at 404-419-6571 or
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or consult an experienced attorney in your community.
