On Jan. 1st 2016 the Illinois equity crowdfunding law became effective. In a state with a reputation for being unfriendly to business and overprotective of its citizens, Illinois legislators passed the most aggressive intrastate crowdfunding law in the country. Title III of the Jobs Act which legalized investment crowdfunding limits companies to raising $1mm in a 12 month period and has strict limits on the amounts that both accredited and unaccredited investors can invest. In some cases limiting investors to $2,500 in aggregate (all investments) in a 12 month period. The Illinois crowdfunding law allows companies registered and operating in Illinois to raise up to $4mm a year. Illinois residents who are unaccredited can invest up to $5,000 per deal while accredited investors have no limit to the amount in which they can fund offering companies.
Although the Illinois law became effective on January 1st, companies and investors have been waiting for the Illinois Secretary of State to release the administrative rules and applications for capital raises to being. The delay does not come without a potential payoff. The Secretary of State will have the ability to update the rules and regulations within the law as they gauge what is needed to allow this new market to flourish. We are excited to announce that we fully expect the rules to be released by April 1st.
As we await these rules we are beginning to find news stories and landing pages for Illinois crowdfunding portals. Portals are the mandatory internet intermediaries that must host any Illinois company looking to raise capital using the crowdfunding exemption (which operated under federal rule 147). So far we have come across many developers offering to create internet portals including crowdforce and crowdfundconnect. We have seen that truCrowd (who also operated an intrastate portal in Texas) say they will be entering the market and VestLo who will be operating a custom created Illinois portal operating out of 1871 (famous Chicago startup co-working space). VestLo will be working with the author of the Illinois crowdfunding law, attorney Anthony Zeoli and Axia Law, one of the leading law firms for Chicago based tech startups.
We are very excited to watch this new fundraising mechanism put to use in Illinois as it will quickly become the most powerful tool in the Invest Local Illinois movement. The law (Illinois HB 3429)is designed to allow and encourage investment in local communities by the customers who frequent the businesses looking to raise capital and grow.
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