united-states, legal, equity, crowd-funding, stockI’m wondering about the details of equity crowdfunding especially in light of the JOBS Act.
Some questions:
How many people can fund a business (i.e., be issued shares in the company)? According to the JOBS Act it seems like either 500 or 2,000. Obviously when a company goes public there are more than 2,000 shareholders so I’m wondering how these caps will be implemented over time.
Can people be issued partial shares? And if so, can the partial shares be any decimal point? For example, can I offer 1.37 shares to someone?
Title III of the JOBS Act specifies the all-important, crowdfunding component. When will title III be adopted?
Many companies are incorporated in Delaware. Are there state-specific provisions in the JOBS Act?
The JOBS increased the numbers of shareholders you can have from 500 to 2,000. Of course you COULD have more, it just means you are required to do a bunch of reporting and filing with the SEC. Raising it to 2,000, and relaxing the accredited investor requirement, made a sort of crowd funding possible.
On adoption date, this was in the Wall St. Journal a couple months ago: “A hallmark of the 2012 law, the equity crowdfunding provision isn’t expected to become effective until later this year (2014) because the SEC is still hashing out final rules allowing companies to sell equity stakes in businesses to everyday investors through social media and the Internet”
On state-specific, this is federal so should be relevant no matter which state you are incorporated in.
And avoid partial shares or as they are called “fractional” shares. Technically they are allowed in Delaware, but it would be better to just have a larger authorized number and a really low par value so you minimize your franchise tax.
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