CRAMER: HOUSE CONTINUES CUTTING RED TAPE FOR STARTUP COMMUNITY
WASHINGTON, D.C. – Congressman Kevin Cramer voted in favor of a bill today making it easier for friends and family to support startup businesses across America.
Oftentimes, small businesses rely on the capital of friends and family members to start their businesses. The practice, frequently referred to as a nonpublic offering or a ‘friends and family’ round, gives startups the initial seed capital needed to operate until they’re profitable. However, Securities regulations, typically written for large corporations, cause major problems for these small businesses – exposing them to potential lawsuits and future liabilities by unintentionally violating the Securities Act. Violations of the Securities Act occur because there’s no clear definition of the difference between a public and non-public offering.
The Micro Offering Safe Harbor Act (H.R. 2201) alleviates this problem by providing an exemption referred to as a “private offering.” The amendment to the Securities Act allows small businesses to operate with the assurance that they will not be subject to unknown legal liabilities.
“No one should need a team of lawyers to get his or her business off the ground,” said Cramer. “This bill provides an exemption for our entrepreneurs who rely on their friends and family to get started. With North Dakota’s startup community being an important part of our local economy, it’s my hope this bill addresses concerns for business owners and ensures our startups get the access to capital they need to grow a successful business.”
Under the bill, small businesses will qualify for a micro-offering exemption so long as:
- Each purchaser has a substantive pre-exiting relationship with an officer, director, or shareholder with 10 percent or more of the share of the issuer.
- The issuer reasonably believes there are no more than 35 purchasers of securities from the issuers that are sold in reliance on the exemption during the 12-month period preceding the transaction.
- The aggregate amount of all securities sold by the issuer does not exceed $500,0000 over a 12-month period.
Cramer continues supporting the North Dakota startup community through his work in Congress. In January, Cramer supported the Helping Angels Lead Our Startups (HALOS) Act, which clarifies that certain startup companies can give presentations about their company and host events like demo days without violating SEC investment solicitation bans. He also supported the Encouraging Employee Ownership Act in April, which directs the Securities and Exchange Commission (SEC) to make it easier for employees to assume an ownership stake in the companies they work for. And in recognition of Start-Up Day Across America in August, Cramer met with a host of startup founders at the NDSU Research and Technology Park in the Fargo-Moorhead area.