South Dakota Business Law - Small Business Update

The U.S. House of Representatives passed two bills aimed at improving conditions for startup investing. The two bills ease restrictions on small business capital raising through crowdfunding by raising caps on offerings and increasing the number of eligible investors in early-stage venture capital funds. The Fix Crowdfunding Act (HR 4855) would amend the 1940 Investment Company Act by including a new definition of a “crowdfunding vehicle” that isn’t considered an investment company. In addition, it would also broaden the ability of those crowdfunding issuers to be automatically exempt from registration in those offerings. It would also raise the amount that a company can crowdfund, from $1 million to $5 million. A 2012 law opened up the rules for crowdfunded investments. The bill was approved by a vote of 394-4. The new crowdfunding rules went into effect earlier in 2016, after being formally approved by the Securities and Exchange Commission in 2015.

The second bill, Supporting America’s Innovators Act (HR 4854), would expand to 250, from 100, the number of investors, often called “angel investors,” allowed to participate in early-stage venture funds without the fund being considered an investment company. The legislation passed 388-9. The Congressional Budget Office said implementing both bills would have “no significant effect” on the Securities and Exchange Commission's costs or operations.