(Using the NC PACES Act exemption as an example)
Let’s look at NC PACES as an example.
If you are using an NC PACES offering, you can build a company profile on Localstake NC for what is called a North Carolina Paces offering (NCPO), or make a website yourself if you prefer to use a smaller offering type called a Local Public Offering (LPO). But the platform or your website has to be compliant with the PACES law and the rules on the NC Secretary of State website, so you should get familiar with those too. Read the FAQs first, then the PACES Act rules to get a good idea how this all works.
- Local Public Offering (LPO) – you can raise up to $250k, and promote the offering in a variety
of ways including social media, advertising, and events. You do not have
to use the internet to promote or list your offering, but if you do you
must have a PACES compliant website. You will still need to follow all
the PACES rules, except where the LPO rules provide you with a better
alternative that override the normal PACES rules. This is a "do-it-yourself" offering that under the current rules cannot use a registered funding platform or broker/dealer to host the offering. You will create and register the offering and submit the offering docs and marketing plan to the NC Securities Division, and meet with them to get the offering approved before you can launch.
- NC PACES Offering (NCPO, up to $1M, also called the Invest NC Exemption) – you can raise up to $1M without audited
or reviewed financial statements as long as you give investors financial
information required by anti-fraud rules. In this case, you must use a
PACES compliant crowdfunding platform like Localstake NC, and you cannot publicly promote the offering
other than with a limited tombstone type description that links to the
offering website. With this type of offering, the platform will provide the tools and assistance to put the offering together, get it registered with the state regulators, manage the offering campaign, and make sure everything is compliant. In many cases this will be easier and more effective for issuers even if they are raising $250K or less.
- NC PACES Offering (NCPO, up to $2M, also called the Invest NC Exemption) – you can raise up to $2M if you have GAAP compliant financial statements that have been reviewed or audited by a CPA. Your financial statements must cover the longer of 12 months or the period required by GAAP. In this case, you must have a PACES compliant platform, and you cannot publicly promote the offering outside the platform other than with a limited tombstone type description that links to the offering website.
You should also make sure your company meets at least one of the requirements in Rule 147A for using an intrastate exemption. The company must establish that it has a meaningful presence within the state by satisfying at least ONE of the following FOUR “doing business” requirements:
Note: Both historical financial statements and financial projections must satisfy the anti-fraud rules of securities laws. Avoid telling partial truths. What you omit can create liability if it misleads investors. Be careful to be reasonable in what you assume when you create projections and tell investors your assumptions so they can determine reasonableness for themselves.
Note: Check with your securities attorney whether non-GAAP financial information you give investors will satisfy anti-fraud rules. All the dollar limits mentioned above are for rolling 12- month periods.