April 7, 2015

Maine's New Crowdfunding Law Gives Small Businesses Access to Larger Investment Pools

According to Maine’s Securities Office, "crowdfunding is an online money-raising strategy that began as a way for the public to donate small amounts of money, often through social networking websites, to help artists, musicians, filmmakers, and other creative people finance their projects."  Maine Securities Corp. president Brad McCurtain recently told the Portland Press Herald that in 2014 crowdfunding websites raised more than $5 billion globally, 10 times the amount raised in 2009.

Many see crowdfunding as a way to give fledgling businesses access to larger investment pools. Maine took a step in that direction when the Securities Office adopted a rule implementing a 2014 law authorizing crowdfunding for business investments (Rule 523, implementing 2014 PL Chapter 452, effective January 1, 2015). According to the article, proponents hope the rule will stimulate the growth of small businesses by allowing them to acquire capital from a larger pool of investors.  The article highlights the rule’s investment limits:
  1. $5,000 maximum per individual investor.
  2. $1 million maximum raised capital for each company in any rolling 12-month period.
  3. Convicted felons are prohibited from selling equity in their companies.  
Citing research conducted by the North American Securities Administrators Association, the article noted that 14 other states have laws allowing entrepreneurs to sell shares to investors in their states. Maine, though, is the first that allows entrepreneurs to sell shares to investors regardless of their residence. For more information on crowdfunding initiatives in other states, see the 2014 Bloomberg Law article, States Pilot Crowdfunding Initiatives to Increase Funding for Small Business.

For more information on crowdfunding in Maine, read the full Press Herald article.