Crowdfunding June 18, 2012

1. CROWDFUNDING
Roger Royse
Royse Law Firm, PC
1717 Embarcadero Road
Palo Alto, CA 94303
rroyse@rroyselaw.com
www.rroyselaw.com
Skype: roger.royse June 18th, 2012
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including any attachment to this communication, is not intended or written to be used, and cannot be used, by any taxpayer for the purpose of (1) avoiding penalties
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2. JOBS ACT
Jumpstart Our Business Startups Act (JOBS Act)
• Improves access to capital markets for emerging
growth companies
• Relaxes reporting and disclosure
requirements for public companies with
less than $1 billion in gross revenues
• Crowdfunding
• Exemption from registration for issuance of
securities
• Securities issued through crowdfunding do
not count towards registration threshold
• Increases 500 shareholder registration
threshold
• Implementing regulations due by the end of the
year
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3. CROWDFUNDING
Exemption from Registration
• Private companies may sell up to $1 million of securities in a 12-month
period
• Amount sold to a single investor in any 12-month period is a maximum of:
• Greater of $2,000 or 5% of annual income or net worth if annual
income or net worth is less than $100,000; or
• 10% of annual income or net worth (up to a maximum of $100,000) if
annual income or net worth is greater than $100,000
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4. CROWDFUNDING
• Investment must be through an “intermediary” broker or funding
portal
• Intermediary must register with SEC and any applicable self-
regulatory organization
• Issuer disclosure requirements
• File business plan with SEC
• File financial statements
• Audited if offering exceeds $500,000
• Reviewed by an independent CPA if offering is between
$100,000 and $500,000
• Annual SEC filings and annual reports
• Post fundraising
• Securities cannot be resold within 12 months
• Private right of action for material misstatements/personal liability
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5. CROWDFUNDING
Points for Consideration
• Crowdsourcing through donations, e.g.
Kickstarter or IndieGoGo
• Public solicitations and use of the internet
and social media
• Advertising terms of offer is restricted
• Issuer can only direct investors to
broker/funding portal
• Costs of disclosure and reporting
• Use of intermediary
• Risk of fraud
• High number of unsophisticated investors
• Fiduciary duties to all investors
• Could be a concern for VCs in future
fundraisings
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7. PALO ALTO LOS ANGELES SAN FRANCISCO
1717 Embarcadero Road 11150 Santa Monica Blvd., 135 Main Street,
Palo Alto, CA 94303 Suite 1200 12th Floor
Los Angeles, CA 90025 San Francisco, CA 94105
www.rroyselaw.com
www.rogerroyse.com
E-mail: rroyse@rroyselaw.com
Skype: roger.royse
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