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WAC 460-99C-030: Availability

Published: 2015

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WACs > Title 460 > Chapter 460-99C > Section 460-99C-030



Agency filings affecting this section

WAC 460-99C-030


(1) The crowdfunding exemption in RCW 21.20.880 is intended to allow start-up companies to raise capital in small securities offerings to Washington residents. The rules in this chapter provide for the use of a simplified offering document designed to provide adequate disclosure to investors concerning the issuer, the securities offered, and the offering itself. Certain issuers may not be able to make adequate disclosure using the simplified Washington Crowdfunding Form and will, therefore, be unable to utilize this exemption. The director finds that the Washington Crowdfunding Form is generally unsuitable for the following issuers and programs and that, therefore, they will not be allowed to utilize the crowdfunding exemption unless written permission is obtained from the director based upon a showing that adequate disclosure can be made to investors using the Washington Crowdfunding Form: (a) Holding companies, companies whose principal purpose is owning stock in, or supervising the management of, other companies; (b) Investment companies subject to the Investment Company Act of 1940, including private equity funds; (c) Portfolio companies, such as real estate investment trusts; (d) Development stage companies that either have no specific business plan or purpose or have indicated that their business plan is to engage in merger or acquisition with an unidentified company or companies or other entity or person; (e) Companies with complex capital structures; (f) Blind pools; (g) Commodity pools; (h) Companies engaging in petroleum exploration or production or mining or other extractive industries; (i) Equipment leasing programs; and (j) Real estate programs. (2) The crowdfunding exemption is available only to a corporation or centrally managed limited liability company or limited partnership that is resident and doing business within Washington at the time of any offer or sale of securities. (3) The aggregate purchase price of all securities offered by an issuer in an offering made pursuant to the crowdfunding exemption in RCW 21.20.880 may not exceed one million dollars. (4) The crowdfunding exemption is available only to equity offerings by the issuer of the securities and is not available to any affiliate of that issuer or to any other person for resale of the issuer's securities. The exemption is not available to debt offerings. (5) For the purposes of this section, "equity" includes convertible preferred stock that is authorized and issued pursuant to charter documents that provide holders of the convertible preferred stock with the following protections: (a) A provision restricting the payment of dividends on common stock or other outstanding securities of the issuer unless comparable dividends are paid on all convertible preferred stock based on the number of common shares into which they are convertible; (b) A liquidation preference that provides that the holders of the convertible preferred stock are entitled to receive in preference to the holders of any outstanding common stock an amount that is at least equal to the amount at which the convertible preferred stock was purchased from the company plus any accrued but unpaid dividends; (c) A conversion feature that allows holders of the convertible preferred stock to convert their shares into common stock of the company at any time at the conversion rate of at least one common share per share of convertible preferred stock. The preferred stock may either be participating or nonparticipating preferred stock; (d) An appropriate antidilution provision providing for an adjustment of the number of shares into which such stock is convertible upon any stock split, stock dividend, or similar event. Such charter documents must also provide for a similar adjustment upon the issuance of additional common stock, preferred stock, or convertible debt by the issuer for consideration less than either the consideration paid to the company for the convertible preferred stock or the current market price for the common stock; (e) Voting rights that provide that holders of convertible preferred stock shall be entitled to that number of votes on all matters presented to stockholders equal to the number of shares of common stock then issuable upon conversion of such shares; (f) Voting rights that provide that as long as at least fifty percent of the convertible preferred stock issued remains outstanding, the approval by at least fifty percent of the voting interests in the outstanding shares of convertible preferred stock is required in connection with: (i) The creation of any senior or pari passu security to the convertible preferred stock; (ii) Any increase or decrease in the number of authorized securities; (iii) The adoption or amendment of any incentive compensation plan; (iv) Any adverse change to the rights, preferences, and privileges of the convertible preferred stock; (v) Any redemption, repurchase, or other acquisition for value of any of the company's equity securities, other than from present or former consultants, directors, or employees pursuant to the terms of a stock option plan of the company; (vi) Any material change in the company's line of business; (vii) The merger, consolidation, or reorganization of the company with and into another company or entity, or of any other company or entity with and into the company; (viii) The acquisition of a substantial portion of the assets or business of another company or entity or any other acquisition of material assets; (ix) A sale of all or substantially all of the company's assets; (x) Dissolution or liquidation of the company; and (xi) Any other action materially adversely affecting the interests of the holders of the convertible preferred stock. [Statutory Authority: RCW 21.20.450, 21.20.880, 21.20.883, 21.20.886, and 2014 c 144. WSR 14-21-001, § 460-99C-030, filed 10/1/14, effective 11/1/14.]