By Herrick K. Lidstone, Jr., Burns, Figa & Will, P.C.
Originally published in Colorado Bar Association
Business Law Section Newsletter (August 2015)
Expanded version available here.
House Bill 2015-1246 (the Colorado Crowdfunding Act) became effective August 5, 2015. The Colorado Crowdfunding Act added C.R.S. § 11-51-308.5 to the Colorado Securities Act (§§ 11- 51-101 et seq.) to establish an exemption from registration under the Colorado Securities Act for capital formation for small businesses seeking up to $1 million ($2 million if audited financial statements are available) from a crowd of prospective investors in what looks much like a public offering of securities. H.B. 1246’s primary sponsors were Representatives Pete Lee and Dan Pabon and Senators Mark Scheffel and Owen Hill, and it passed through the 2015 Colorado General Assembly almost unanimously. According to the legislative declaration:
- Start-up companies play a critical role in expanding economic opportunities, creating new jobs, and generating revenues; and
- Lack of access to capital is an obstacle to starting and expanding small business, inhibits job growth, and has negatively affected the state’s economy.
The General Assembly also determined that, in its judgment, costs and complexities of compliance with the existing registration or exemption requirements of the federal and state securities laws “can outweigh the benefits to Colorado businesses seeking to raise capital by small securities offerings” and that “crowdfunding . . . raising money on-line through small contributions from a large number of investors . . . will enable Colorado businesses to obtain capital, democratize venture capital formation, and facilitate investment by Colorado residents in Colorado start-ups, thereby promoting the formation and growth of local companies and the accompanying job creation.”
