On Monday, Governor John Hickenlooper signed the Colorado Crowdfunding Act into law which will allow the state’s residents to be able to stock in local companies without becoming an accredited investor.
Earlier this year, a drafted crowdfunding legislation for Colorado was presented that will facilitate crowdfunding by authorizing on-line intermediaries to match the state’s investors with a state-based business.
Colorado Crowdfunding Act covers the following:
- Non-accred’s can invest up to $5000 but no more. Accreds, as defined by existing federal guidelines, may invest as much as they want.
- If the issuer provides audited financial statements they may raise up to $2 million. Without audited financials the raise is capped at $1 million.
- Issuers must explain these are risky & illiquid securities. All in plain, non-technical language.
- Issuers must provide quarterly updates to investors.
- Funding portals must keep records of shareholders (available for inspection) and may only be compensated by a fixed amount for each offering, a variable amount based on the length of time that the securities are offered by the on-line intermediary, or a combination of the fixed and variable amounts.
Representative Pete Lee, who sponsored the bill with representative Dan Pabon, told the Denver Post:
“This is to help Colorado small business trying to raise capital and Colorado residents who want to invest in Colorado business. It was the perfect bill.”
Pabon noted that the target user is the small business owners who are looking to the local communities for support. He then added:
“I really think they’re looking at friends and neighbors to invest in the company and not some private equity firm. It’s the people they see at the grocery store.”