New NC “Local Public Offering” Law Passed for Crowdfunding

The FintekNews team lived in North Carolina for a moment, and it’s an interesting place.  It’s both old South and progressive at the same time, with a touch of CARY (short for “Containment Area for Relocated Yankees”) thrown in. We never knew quite what to make of it all, but we were impressed today to see that the state has passed the first ever “Local Public Offering” law – the NC PACES Act – laying down simplified rules for North Carolinans to invest in NC enterprises through crowdfunding .  We think this is a BRILLIANT way to get locals to buy into growing local startups.  We believe that many other states will adopt similar laws in the coming months, once they see how this program works. 

(Cindy Taylor/Publisher)

……A very important new idea enabled by the NC PACES Act and the new rules is called the Local Public Offering, or LPO. This is a new and innovative idea that has not yet been tried at the Federal Level or in other states. By following the rules for an LPO, the startup or small business can raise up to $250,000 on their own, and they do not need to use a crowdfunding platform or registered broker/dealer.

They can put together a simple equity, debt, or revenue share loan offering, set up an escrow account with their bank or lawyer, and then register the offering with the state. Once approved, they can promote the offering to their friends, family, customers, and community to get the funding. The LPO is a very cost effective way for small businesses and startups to do crowdfunding, and achieves a good balance between cost and risk for both issuers and investors.

The PACES Act and the rules also have some very important investor protections built in. All offerings are registered with the state, must declare a target amount to be raised and a minimum amount to be raised, and must include information about the use of the funds and other business plan details.
Money collected for the offering is kept in a registered escrow account and cannot be distributed until the minimum is in escrow. If the minimum is not reached, all money is returned to investors without charges or fees. If the minimum is reached, the money is distributed to the issuer…