Key Points of CROWDFUND ACT under The JOBS Act

  • A company will be able to crowdfund up to $1 million over a 12 month period.
  • Individuals with annual income or net worth of less than $100,000 may invest up to $2,000 or 5 percent of their annual income or their net worth, whichever is greater, over a 12 month period. Individuals with annual income or a net worth of $100,000 or more may invest up to 10% of annual income or net worth, capped at $100,000 maximum aggregate amount, over a 12 month period.
  • Investors can fund one company or several companies as long as they remain within these annual limits.
  • Minimum Review & Checks: Companies that seek to crowdfund a securities-based round must have background checks done on all principles with 10% or greater ownership in the company and provide full and adequate disclosures with a business plan and a full description of their ownership and capital structure.
  • Crowdfunding portals must, alongside the legally required background checks, must do a full review of the company, disclosures and the raise in order to approve a company prior to fundraising.
  • An investor must wait a minimum of 12 months before selling her/his securities unless the sale is to a family member, the issuing company, or an accredited investor, in addition to other restrictions normally placed on the transfer of securities.
  • A crowdfunding round does not prevent a company from raising capital through other legal channels.
  • Companies crowdfunding will be exempt from the 500 shareholder cap pursuant to rules and regulations of the SEC.
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