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

To offer equity to investors in West Virginia, you must comply with the state’s securities laws. Here are the requirements:

Requirements for Offering Equity to Investors in West Virginia

  1. The issuer must be a for-profit entity organized under the laws of West Virginia with its principal place of business in West Virginia [1.3].
  2. The purchaser must be a resident of West Virginia or be an entity organized under the laws of West Virginia with its principal place of business in West Virginia [1.3].
  3. The offering must be made exclusively through an internet-based crowdfunding portal that is incorporated or organized under the laws of West Virginia and authorized to do business in West Virginia and registered with the commissioner [1.1].
  4. The crowdfunding portal must contain a conspicuous disclaimer that reflects that access to securities offerings on the website is limited to West Virginia residents and offers and sales of the securities on the website are limited to persons that are West Virginia residents [1.1].
  5. There must be an affirmative representation by a visitor to the crowdfunding portal that the visitor is a resident of West Virginia before the visitor can view securities-related offering materials on the crowdfunding portal website [1.1].
  6. The crowdfunding portal must take reasonable steps to verify that all prospective purchasers are West Virginia residents [1.1].
  7. The transaction must meet the requirements of the federal exemption for intrastate offerings in section 3(a)(11) of the Securities Act of 1933, 15 U.S.C. section 77c(a)(11) and SEC rule 147, 17 CFR 230.147 [1.4].
  8. The sum of all cash and other consideration received from the issue of securities under this exemption may not exceed $1 million per annum unless the issuer prepares and produces audited financial statements on a quarterly basis to the commissioner. If audited financial statements are prepared and produced to the commissioner, the sum of all cash and other consideration received from the issue of securities shall not exceed $2 million per annum [1.4].
  9. The issuer may not issue more than $10,000 per annum to any single purchaser unless the purchaser is an accredited investor as defined under rule 501 of SEC Reg D, 17 CFR 230.501 [1.4].
  10. All funds received by the issuer from purchasers under this article shall be held in escrow by an attorney licensed to practice law in West Virginia who shall deposit the funds in a depository institution authorized to do business in West Virginia until such time as the offering amount sought is attained or the time period for the offering has elapsed [1.4].
  11. All funds received by the issuer from purchasers under this article shall be used by the issuer in accordance with the representations by the issuer to purchasers [1.4].
  12. The duration of the offering will not exceed twelve months unless the issuer applies to extend the offering for a period not to exceed twelve additional months [1.4].
  13. A qualified company shall be a certified West Virginia capital company [3.3].
  14. A qualified company shall have a reasonably accessible business office located within the State of West Virginia, which office has a listed telephone number and is open to the public during normal business hours [3.3].
  15. A qualified company which is not a small business investment company shall maintain all of its capital base, except that which has been invested to meet the purposes of this article, in bank accounts and financial institutions which are located in the State of West Virginia or in any other interest bearing instruments with a maturity of less than one year which are obtained from and managed by a West Virginia corporation [3.3].
  16. A qualified company shall have a capital base of at least $1 million, but not greater than $4 million, which must be raised after July 1, 1986 [3.3].
  17. No more than twenty-five percent of each separate capital base of a qualified company which is not a small business investment company shall be in the form of full recourse, interest bearing demand notes, backed by an irrevocable letter of credit or bond from a reputable source, as determined by the authority [3.3].
  18. A qualified company’s stated purpose shall be to encourage and assist in the creation, development or expansion of West Virginia businesses [3.3].
  19. Securities for which a registration statement has been filed with the securities and exchange commission under the Securities Act of 1933 with respect to a federal covered security under section 18(b)(2) of the Securities Act of 1933 may be offered for sale or sold to residents of this state upon the commissioner’s receipt of certain documents [5.1].

Therefore, to offer equity to investors in West Virginia, you must comply with the above requirements.

Source(s):
Jurisdiction

West Virginia