Oregon is a rural state. And strengthening a rural economy in a small town is simply not easy, never mind growing it.
This year a unique statewide team will have helped create new finance law, through the rule making process by the Oregon Department of Finance and Corporate Securities. The new law will allow Oregon-grown companies to raise capital from their neighbors. Any Oregonian will be able to invest in their local businesses.
For rural business owners, this is probably the best news they’ve never heard.
Oregon is the eighth largest state in land size. Once these rules become law, planned for January 1, 2015, getting the word out is going to be a challenge. Who will we tell? What newswire, radio station, or network will let business owners know, and help them use it wisely? What entity will teach ordinary citizens how to do due diligence or to read offering documents? As an educator, this is the challenge of a lifetime. And, it is keeping me up at night. Without a strong information plan and education network, the new law won’t benefit Oregon.
Think about it. For the first time ever, Oregon small businesses will have an affordable strategy for raising capital. They will be able to publicize that they are raising capital from the public, and allow their Oregon neighbors to invest in them. Communities investing in themselves. Revolutionary? Absolutely. This has never been legal in Oregon.
What are the details of this law?
First, it’s called a Community Public Offering (CPO). Laws like this fall under the federal SEC rules focused on small business capital, intrastate finance, and state governance. If nearly all the transactions of a business fall within the state (intrastate) then the state can create unique, state-based rules. Our ‘main streets’ are lined with these kinds of businesses. In fact, in some states where similar laws are being enacted the laws are actually called the “Main Street Law.”
The Oregon rules will allow limited public advertising of the security, inviting average citizens (unaccredited folks like you and me) to invest in real securities. (This is NOT KICKSTARTER. Kickstarter is based on donations, and therefore not securities-based crowdfunding.) The new Community Public Offering would allow qualifying business owners to raise up to $250,000 within a 12-month period. There is also a cap on individual investors of $2,000 per person, per deal. Securities such as equity and debt notes qualify, as well as the range of variables within those categories.
Yes, real securities crowdfunding. And this is not the federal JOBS Act.
I know. Unless you’re a securities lawyer, this may sound to you like a bunch of new ideas, words, concepts, and legalese… and you’d be right. But, soon this will be standard practice. We’ll all do it. Imagine your children and grandchildren being wise investors in their communities. Now that’s a vision for a strong Oregon economy!
But back to rural Oregon. In NE Oregon, where we are working with the NE Oregon Economic Development District, their leadership is building key partnerships and infrastructure for local investing, raising awareness and increasing knowledge.
“We’re part of a relationship and learning-centered approach in a region with high levels of small business ownership. Right now we’re laying the foundation for change by providing education and creating new connections between community members and business owners. Our long term goal is for local investing to become a common practice in support of our entrepreneurial culture and community growth. To do that, we’ll need to support local investors and businesses over the long haul,” – Lisa Dawson, NEOEDD, Executive Director.
By building real relationships with community-based strategies, they are taking a regional approach encompassing three rural counties that have not traditionally worked closely together.. They will be the region to watch.
Does this intrigue you? Are you interested in helping your own community? Do you have friends who would want to know more? You may make the difference between a sluggish Oregon, one that can’t help our rural communities, small business, social enterprises, or start-ups, and an Oregon that helps everyone to thrive. Interested?
Let’s make sure this law isn’t the biggest earthquake in history that no one feels!
If you want to know more about the law, here are some links from the SEC.
Intrastate offering exemption
Section 3(a)(11) of the Securities Act is generally known as the “intrastate offering exemption.” This exemption facilitates the financing of local business operations. To qualify for the intrastate offering exemption, your company must:
- be organized in the state where it is offering the securities;
- carry out a significant amount of its business in that state; and
- make offers and sales only to residents of that state.
The intrastate offering exemption does not limit the size of the offering or the number of purchasers. Your company must determine the residence of each offeree and purchaser. If any of the securities are offered or sold to even one out-of-state person, the exemption may be lost. Without the exemption, the company could be in violation of the Securities Act.
You may follow Rule 147, a “safe harbor” rule, to ensure that you meet the requirements for the intrastate offering exemption. It is possible, however, that transactions not meeting all the requirements of Rule 147 may still qualify for the exemption.
Stay tuned. Next post will be more on the statewide team, the entrepreneurs who plan to use the law, and we’ll hear from NEOEDD.