The Georgia Commissioner of Securities recently adopted the "Invest Georgia Exemption," which will make it easier and less expensive for almost any small business located in Georgia to raise capital from fellow Georgians. Unlike most other securities registration exemptions, the Invest Georgia Exemption allows businesses to engage in public solicitations of investors, provided certain conditions are met.
Any business wanting to raise capital using this new exemption must be a corporation or limited liability company (LLC) organized in Georgia and registered with the Secretary of State. In addition,
- The offering of securities must meet the federal exemption for intrastate offerings requirements, Rule 147, meaning all investors must be Georgia residents;
- The total amount raised cannot exceed $1,000,000, not including investments from control persons of the business;
- Unaccredited investors (as defined by the SEC) may not invest more than $10,000 each. However, there is no investment limitation for accredited investors;
- All investments received must be deposited in an institution authorized to do business in the state of Georgia;
- The issuer must file a form of notice with the Commissioner briefly explaining the offering. The notice may be filed after sales have been made, unless there is any general solicitation, in which case the notice must be filed prior to the solicitation; and
- The issuer must inform the purchaser that the securities have not been registered and that there are resale restrictions.
Bob Terry, a securities lawyer of Page Perry, LLC, believes the Invest Georgia Exemption will be a boon for some small businesses in the state. "The exemption removes many of the roadblocks small companies have previously faced when they have wanted to raise additional capital. Companies will still have to be careful to comply with the details of the rule, as well as make full disclosure about their business to potential investors, but they will at least be able to raise new capital much more efficiently than before."
Last fall, the United States House of Representatives overwhelmingly passed legislation similar to the Invest Georgia Exemption, called the Entrepreneur Access to Capital Act. This bill would similarly provide an exemption from federal or state registration for small companies raising up to $1,000,000 in most cases, provided no investor invests more than $10,000. Similar legislation, although with lower investment amounts and the requirement to use a "crowdfunding intermediary," is pending in the Senate. Either of these bills would expand the concept to securities offerings not limited to investors in a single state.