Starting on July 31, companies will be allow to crowdfund up to $2 million in aggregate investments from Virginia residents.
New regulations approved Monday by the State Corporation Commission (SCC) will also cap each share from a non-accredited investor at $10,000.
“The crowdfunding provision makes it easier for the raising of capital, particularly for startup business entities,” SCC spokesman Ken Schrad told Technical.ly DC. It “exempts them from some of the most detailed or stringent requirements of the Virginia Securities Act.”
Companies will still have to file a disclosure statement to the Commission’s Division of Securities and Retail Franchising at least 20 days before the launch of their crowdfunding campaign. They will furthermore be required to send annual reports to investors for three years after the round.
The delay for approval is unclear at this point: “This is new for us, so I can’t answer that question,” said Schrad. District equity crowdfunding pioneer and pop-up restaurant space Prequel waited for two months to obtain approval from the Department of Insurance, Securities and Banking. In Maryland, it took Fundrise seven months to obtain approval, according to Forbes.
The Securities and Exchange Commission — which regulates interstate crowdfunding rounds — has still not published final rules for new crowdfunding regulations introduced by the April 2012 Jumpstart Our Business Startups Act.
D.C. released its final crowdfunding rules — which also allow companies to raise up to $2 million — in October. Earlier that month, Maryland finalized its more conservative regulations, allowing companies to raise only up to $100,000 in debt, from individual investments capped at $100.
According to a June SCC statement, seven (with Virginia, eight) states have settled for a $2 million aggregate maximum, and 10 states have gone with $1 million. Maryland’s $100,000 cap is the lowest in the country.
EquityEats, the D.C.-based crowdfunding platform for restaurants that launched and helped fund Prequel, celebrated the decision. “We can’t wait to support [Virginia] restaurants looking to take advantage of them,” the company’s cofounder and compliance officer, Andrew Harris, said in an email.
But he also urged regulators to consider following the SEC’s proposed framework, which would loosen up broker registration requirements for fundraising platforms like EquityEats. At this stage, all the platform can do for Virginia businesses is to provide administrative assistance, like template documents, marketing tips and verification services.
“If you are an amazing chef or awesome bartender, putting together an equity crowdfunding filing and process for taking investments is going to be a big barrier to being able to utilize these great new rules,” Harris said.