Minnesota Equity Crowdfunding Legislation In 2015 Minnesota enacted its own equity crowdfunding legislation, MNvest, which provides an exemption from registration for offering of equity securities via an online portal which can be a broker dealer, the issuer itself, or another entity approved for that purpose by the Minnesota Department of Commerce. Some important elements of the law are: • The offering must meet the requirement for the federal exemption for intrastate offerings . •The sale of the securities must be conducted exclusively through an online MNvest portal (emphasis added). •The issuer can raise no more than $2 million in a twelve month period if it has audited or reviewed financial statements, and no more than $1 million if it does not have audited or reviewed financials. • At least 80 percent of the proceeds of the offering must be used in connection with operation of the issuer’s business within Minnesota. •No single purchaser may purchase more than $10,000 in securities in connection with the MNvest offering unless the investor is an accredited investor. •All funds for purchase must be held in escrow until the minimum amount stated in the offering is reached. The escrow agent must be a bank, trust company, savings bank, savings association or credit union authorized to do business in Minnesota. Portal operators are explicitly prohibited from serving as escrow agents. • The MNvest issuer and the portal operator may engage in solicitation and advertising of the offering provided the advertisement is clear that it is not the offering and is for informational purposes only and that the offering and sale are made through a portal to Minnesota residents only. The advertisement may contain other information like anticipated uses of funds to be raised and a link to the issuer’s website. • The portal must conspicuously display a statement whose exact wording is contained in the statute and which makes clear that no agency of government has made any determination of the merits and risks of the investment. The portal must obtain a written or electronic certification from a potential investor that the investor is a Minnesota resident who understands and can bear the risk of loss in the securities and also understands that there is at time offering no market for the secondary sale of the securities. The legislation also contains procedures for application to become a portal, details on portal operator’s responsibility to keep purchaser information private, and a “bad actor” disqualification which disqualifies from a MNvest offering any issuer having any director or executive officer who has been subject to listed disqualifying events. Amendments in 2017 to the crowdfunding statute enabled issuers to avoid the problem of integration of offering amounts where a company makes more than one offering in a given period of time and the amounts of the offerings are summed together providing the possibility of exceeding the statutory limit on offering amounts.
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