In the article for The News & Observer, Here’s what you need to know about NC’s newest way to invest: Local Public Offerings, reporter David Ranii spoke with Smith Anderson partner Benji Jones to learn about the newest way for North Carolina’s small and startup businesses to raise capital from local investors.
Local Public Offerings (LPOs), which went into effect on April 20, allow business owners to raise up to $250,000 in funding through either advertising or personal appeals. Until now, these solicitations were illegal for offerings not registered with regulators. Moreover, the new legislation does not require fundraising to be conducted through a registered crowdfunding platform.
Benji, who helped draft the NC PACES Act that led to this legislation’s implementation, explained that LPOs are designed to be a “relatively simple” way for business owners to raise money, but cautioned that regulators will still be watching. “You cannot commence your offering, verbally or any other way, until you have completed your filing requirements and received approval from the N.C. Secretary of State’s office,” she said. “You also have to file your advertising materials.”
Although other sections of the state’s crowdfunding law went into effect April 1, LPOs were delayed to coincide with the effective date of new federal regulations that were critical to implementing them. Benji noted it was worth the wait, as the regulations also make it much easier for businesses to raise funding via other types of offerings created by the law. “The asphalt on the road is finished. What once was a path is now a road,” she said.
North Carolina’s LPO legislation is a never-before-seen, and therefore untested, way for companies to raise funding, but is only permitted through April 1, 2020, barring an extension from the Secretary of State’s office. Secretary of State Elaine Marshall said though the new LPOs are risky and that would-be investors should be cautious and do their homework before making a financial commitment, she is very hopeful for their success and is excited that other states are already considering the legislation as a possible model.
Benji’s practice focuses on providing advice to public and private companies on a broad spectrum of legal issues affecting businesses, including public equity and debt offerings, domestic private placements, crowdfunding, and other non-traditional private offerings and repurchase programs.