We know, we know — it’s all so exciting! We’ve been waiting and watching as the first crowdfunding bill passed the House in November with an astounding 407 votes. Then we tried to sit tight through the holidays while everyone, including Congress, was on vacation (but sitting tight was difficult now that crowdfunding was so close!). Finally in March, both houses passed the JOBS Act and sent it to the President for his signature on April 5.
Hooray! Let’s go post on our website that we’re offering stock!
WAIT. RIGHT. THERE.
Take a deep breath. It seems like it should be that simple. But just because President Obama signed the bill into law, it’s not time to break out the stock certificates yet.
While the JOBS Act does change the law to permit certain limited offerings of securities — stocks and bonds — to the public without the traditional registration and IPO process, there are still some steps the government needs to take before you can start offering securities. The Act instructs the Securities and Exchange Commission (SEC) to write a set of rules to provide additional guidance for implementing the new law. These rules aren’t due for 270 days after the Act was passed. And you can’t make any offerings until the rules are in place.
But wait, you say, I’m not doing a whole securities offering. I’m just putting a thing on my website that says people can help me with my company by buying a piece of it. That’s okay, isn’t it? That’s not an “offering.”
Um, yep, I bet it is. When we say “securities offering” it sounds very official and a bit dry, and something that requires lots of folks in gray suits sitting around a conference table to do. And, well, yeah, that’s how it often happens. But it doesn’t have to. Just putting it out there that you’re going to be selling stock in your company (or bonds) is probably enough to make it a securities offering. Really.
Now you say, ugh, Thaya, you’re the company’s General Counsel. It’s your job to be a stick in the mud. I’m just a little company and I’m sure the SEC isn’t going to care if I put up a little post on my website.
Yes, as our Director of Entrepreneur Services once put it, “the General Counsel is the one who tells everyone they can’t have cake for breakfast.” But you can’t bet the SEC isn’t going to care about you. How do I know? I can’t be sure, but I do know that last summer a couple of guys had a little plan and the SEC cared about them. These guys decided they wanted to buy Pabst Brewing Company. They created BuyaBeerCompany.com and offered beer and a certificate of ownership for anyone who wanted to help them. And the SEC shut them down.
So now you have something like 240 days to wait until you can start raising money, or open your crowdfunding portal. What should you do now? Well, you could think about how you’re going to comply with all the requirements in the new law and the new SEC rules. And you could think about how you’re going to show investors you mean business — like talking to us about how to get checked out by CrowdCheck. Those 240 days will fly by. Really.