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Can I offer equity to investors without violating securities laws in North Carolina? What are the requirements?

Here are the requirements for offering equity to investors without violating securities laws in North Carolina:

Invest NC exemption.

NCGS 78A-17.1

North Carolina law provides an exemption for certain securities offerings under the Invest NC exemption [1.2]. To qualify for this exemption, the following requirements must be met:

  1. The issuer of the security is a business entity formed under the laws of the State and/or registered with the Secretary of State.
  2. The transaction meets the requirements of the federal exemption for intrastate offerings in section 3(a)(11) of the Securities Act of 1933, 15 U.S.C. § 77c(a)(11), and/or SEC rule 147, 17 C.F.R. § 230.147.
  3. The sum of all cash and other consideration to be received for all sales of the security in reliance upon this exemption does not exceed the cap provided in this subdivision.
  4. The issuer has not accepted more than five thousand dollars ($5,000) from any single purchaser in an offering made in reliance upon this exemption in any 12-month period unless the purchaser is an accredited investor as defined by rule 501 of SEC regulation D, 17 C.F.R. § 230.501.
  5. Not less than 10 days prior to the commencement of an offering of securities in reliance on this exemption or the use of any publicly available Web site in connection with any such offering, the issuer shall file a notice with the Administrator, in writing or in electronic form as specified by the Administrator, containing certain information.
  6. The issuer is not, either before or as a result of the offering, an investment company, as defined in section 3 of the Investment Company Act of 1940, 15 U.S.C. § 8a-3, or an entity that would be an investment company but for the exclusions currently provided in section 3(c) of the Act, or subject to the reporting requirements of section 13 or 15(d) of the Securities Exchange Act of 1934, 15 U.S.C. § 78m and 78o(d).
  7. The issuer shall inform all prospective purchasers under this section that the securities have not been registered under federal or State securities law and that the securities are subject to limitations on resale.

The Invest NC exemption provides a way for businesses to offer securities to investors without violating securities laws in North Carolina, as long as the requirements are met. However, it is important to note that there is no guarantee or obligation as to such securities on the part of the State of North Carolina [2.1]. Additionally, if an application is made for approval to issue securities or to deliver other consideration in exchange for one or more securities, claims, or property interests, the Administrator must approve the terms and conditions of such issuance and exchange or such delivery and exchange and the fairness of such terms and conditions [3.1].

I hope this helps!

Source(s):
Jurisdiction

North Carolina