This is the second in a series of articles examining legislation currently awaiting Governor Mark Dayton’s signature (as of May 15, 2015) that will permit equity-based crowdfunding within the State of Minnesota. Part 1 can be found here.
In order to take advantage of the modernization of federal securities laws, the Minnesota House of Representatives and Senate each approved legislation related to securities regulation under Minnesota’s Blue Sky Laws. The bill – commonly known as MNvest – seeks to help emerging growth companies raise capital by “providing an exemption from regulation for crowdfunding transactions.”
This article describes the nine requirements that a public offering – a MNvest offering – must satisfy under the proposed legislation.
- Must be a MNvest issuer when the securities are first offered for sale and continuously through the offering’s closing. In short, MN Issuers are entities organized under Minnesota law whose principal place of business is located in Minnesota, with 80% of its assets and 80% of its gross revenues generated from within the state, among other requirements.
- The Offering must meet federal securities requirements for intrastate offerings. In general terms, the securities must only be offered and sold by persons who are residents of the same state (i.e. 80% benchmarks for businesses).
- The sale must be conducted exclusively through a MNvest portal. In essence, a secure website only available to Minnesota residents, which, interestingly, cannot contain the word “MNvest” in its URL.
- MNvest Issuer must make copies of its financial statements, including its balance sheet and income statement from its most recent fiscal year available for prospective purchasers to review (via the portal). Timing requirements apply to MNvest issuers whose offerings begin more than 90 days after its most recent fiscal year or if the entity was not in existence the previous year.
- If the MNvest issuer’s financial statements have either been audited by a Minnesota licensed Certified Public Accountant (CPA) firm using standards set forth by the American Institute of CPAs or Public Company Accounting Oversight Board, or reviewed by a Minnesota licensed CPA firm using the AICPA’s Statements on Standards for Accounting and Review Services, then the MNVest issuer may raise up to $2,000,000 in any 12-month period.If, however, the MNvest issuer’s financial statements have Not been audited or reviewed, then the MNvest issuer may only raise up to $1,000,000 in any 12-month period.
- MNvest issuer must use at least 80% of the net proceeds from the offering for its business operations within Minnesota.
- No single person may purchase more than $10,000 in securities, unless he or she is an accredited investor.
- All payments for purchasing securities must be held in escrow until the amount raised from purchases reaches or exceeds the minimum offering amount. The escrow agent must be an authorized bank, regulated trust company, savings bank, savings association or credit union. The escrow agent has no duty or liability to an investor, and only acts at the direction of the party establishing the escrow account.
- A filing fee of $300, which must be made within 10 days before beginning an offering. A notice of claim of exemption and a copy of the disclosure documents must also be submitted along with the $300 filing fee.
Stay tuned for the next article in the DLO MNvest series, discussing the rules for advertising a MNvest offering .
 See House Bill H.F. No. 328.
 Minnesota Senate Bill S.F. No. 138.
 See Minnesota Statutes chapter 80A.
 Minn. Stat. §80A.461 (proposed).
 Examining Senate Bill S.F. No. 138, which requires Governor Dayton’s approval to become law in Minnesota. NOTE: These 9 requirements are not yet law in Minnesota as of May 15, 2015.
 See Part 1 of this series of articles, which explains who could qualify as a MNvest Issuer.
 See Minn. Stat. §80A.461 subd. 1(b) (proposed).
 See Minn. Stat. §80A.461 subd. 3(2) (proposed); see also fn7.
 Minn. Stat. §80A.461 subd. 3(3) (proposed)
 Minn. Stat. §80A.461 subd. 6(1) (proposed).
 See Minn. Stat. §80A.461 subd. 3(4) (proposed).
 See Minn. Stat. §80A.461 subd. 3(5)(i) (proposed).
 See Minn. Stat. §80A.461 subd. 3(5)(ii) (proposed).
 Minn. Stat. §80A.461 subd. 3(6) (proposed).
 Minn. Stat. §80A.461 subd. 3(7) (proposed). An accredited investor, under Rule 501(d) of Regulation D, is (i) an individual with at least $200,000 in income over the past 2 years ($300,000 jointly with spouse) or has a net worth of $1,000,000; or (ii) an entity solely comprised of accredited investors or an entity with at least $5,000,000 in net assets.
 See Minn. Stat. §80A.461 subd. 3(8) (proposed).
 See Minn. Stat. §80A.461 subd. 3(11) (proposed).