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Corporate Law

Legal Implications of Crowd Funding

Crowd funding has risen to prominence as a solution in creative financing. But what seemed like a simple process has been complicated through recent rulings of the SEC.  The SEC has limited social media as a means of raising capital for new projects and expansions.  Although the SEC has not issued permanent guidelines, their proposed guidelines are very clear on one issue: crowdfunding as a way of selling “shares” must be limited to intrastate activity only.  Prior to the most recent recommendations by the SEC, the state of Michigan set guidelines, ensuring that crowdfunding as a type of security offering had to be offered only by Michigan companies; the investors must be Michigan residents as well.

The SEC has put the kibosh on utilizing social media for crowdfunding in many instances, because the opportunity to invest will be published to non-residents of Michigan. Therefore entities who wish to crowdfund must have multiple disclaimers about the investment opportunity being clearly an intrastate offering and there need to be adequate measures to ensure the investors are only Michigan investors.

Dawda Mann attorneys offers extensive expertise in all areas of corporate financing and venture capital for both start-up and established business interests. We can help you navigate the sometimes murky waters of financing to help you grow your company and remain in compliance with the law as it changes.