Skip to main content

Illinois Approves Intrastate Crowdfunding

As one author noted, "Here are some of the main points of the Illinois Intrastate Crowdfunding Bill (HB 3429).

Adds new definition of 'accredited investor' which is now tied to the federal definition (see new 815 ILCS 5/2.34).

Amends the transaction exemption provided by 815 ILCS 5/4(H) to allow for offers, sales and/or issuances of securities to any 'accredited investor' and for the general promotion of the same (to the extent specified in the Bill).

Provides new definition of  'qualified escrowee,' which includes title insurance companies and banks authorized to do business in Illinois who maintain at least one (1) physical location in the state (see new 815 ILCS 5/2.35).

Provides new Intrastate Crowdfunding Exemption (see 815 ILCS 5/4(T)). Highlights include:
$1,000,000 funding cap unless the Issuer has made available to prospective purchasers audited financial statements, in which case the funding cap will be $4,000,000. – See subsection (2)
Max amount received by an issuer from any particular purchaser (other than accredited investors) is limited to $5,000 per year. – See subsection (3).

Requires use of a 'qualified escrowee' for the collection of funds from potential purchasers. – See subsection (8).

Requires the issuer, and each internet portal used, to establish commercially reasonable measures for limiting access to information to residents of Illinois. – See subsection (11).

Allows for 'general announcement' of offering by issuer. – To be in final administrative rules.
Requires delivery (or electronic access to) internally prepared quarterly financial statements/business reporting of issuer.  – To be in final administrative rules.

Provides new definition of 'registered internet portal.' (see 815 ILCS 5/2.36).

Establishes new provision related to offerings made through a 'qualified internet portal' (see 815 ILCS 5/8d). Highlights include:

Provides for an exemption from registration as a 'dealer' or 'investment adviser' under the Act for an internet portal that meets certain requirements. Specifies certain actions which do not, by themselves, constitute offering investment advice or recommendations. – See subsection (b).

The portal shall be owned by an entity organized, or otherwise qualified to do business, in Illinois and in good standing. – To be in final administrative rules.

Allows for 'general announcement' of offering by internet portal. – To be in final administrative rules."

Comments

Popular posts from this blog

Crowdfunding Accounting 101 - Revenue Recognition in Crowdfunding

A start-up using crowd funding to create a product is different from a normal company. The start-up has cash inflows from donations but does not have a product, yet. In this situation, we recommend using completed-contract method to recognize revenue. Under this way of thinking, we assume the start-up is akin to a project or a long-term contract. The crowdfunding company will find it difficult to estimate the revenue from crowdfunders and, hence, the cost of rewards or perks. Under International Financial Reporting Standards (IFRS) and GAAP guidelines, if the firm cannot reliably measure the outcome of the project, revenue should be recognized based on contract costs. These costs should be expensed when incurred. Profit is recognized only at the completion of the project. In summary, for crowdfunding companies, revenue, expense, and profit are recognized only when the crowdfunded product is actually manufactured. 1 For example, assume that AAA Corp. wants to manufacture bicyc...

Top 50 Crowdfunding Campaigns: Fifty Most Successful Crowdfunding Campaigns

  Top 50 Crowdfunding Campaigns: Fifty Most Successful Crowdfunding Campaigns Kindle Edition https://www.amazon.com/gp/product/B00RKK4NL0/ref=dbs_a_def_rwt_bibl_vppi_i0

Top 50 Crowdfunding Campaigns

The chart below results from an analysis of the Top 50 crowdfunding campaigns on Indiegogo, 'Top' measured by total dollars raised. The X axis shows the dollar amount of the reward or  perk ($1 to $10, $11 to $20, etc.) The Y axis shows the cumulative number of rewards/perks collected across all 50 campaigns, so the chart shows that, for the top 50 crowdfunding campaigns on Indiegogo, 100,000 rewards/perks with a  value ranging from $1 dollar to $10 dollars were selected by supporters.  Normally, we might expect this chart to be convex, declining steadily from $1 to $5000. This is not what we see, however. It seems that people are willing to donate small dollar amounts, up to about $50, and then contributors look to donate at least $100. What's going on here? To explain this phenomenon, classify backers into two categories: 1. The first category are people who simply want to help. They donate less than $50 dollars and do not donate for the reward (normally a T-shi...