Ready to spearhead local economies securities legislation in your state? Here are the basics:
What: State legislation to open doors to raising capital for a variety of projects and enterprises necessary to promoting economic and ecological resilience, including community-supported agriculture programs, small farms, agricultural land trusts, cooperatives, renewable energy, and small businesses.
Why: An enormous share of U.S. land and enterprises is about to go up for sale as baby boomers retire. In addition, it has become critical that society transition to renewable energy as soon as possible. As these transitions take place, a Local Economies Securities Act in each state can ensure that community members can own their local enterprises, land, and energy. Existing securities laws generally require that enterprises complete a complicated and burdensome registration process prior to raising capital through loans and investments, which acts as a barrier to local ownership of these assets. By creating a process to exempt small securities offerings under certain circumstances, this bill removes key barriers to the creation and local ownership of a wide variety of projects and enterprises that are critical to local resilience.
Where do we need this law? Every state would benefit from a securities law that prioritizes local economies, micro-enterprise, farmland conservation, and renewable energy development. The Sustainable Economies Law Center (SELC) has worked with lawmakers to introduce the Local Economies Securities Act in California. Most US States and the federal government have adopted crowdfunding legislation that applies to broad categories of securities offerings. However, even in many of those states, securities laws could use improvement.
Key Provisions: The following provisions - particularly the dollar amounts - are flexible. SELC sees these provisions as a reasonable starting points:
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Cooperatives: Allow for the offer and sale of memberships in cooperatives, provided that the offering does not exceed $1,000.
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Community-Supported Agriculture: Clarify the legal status of memberships in community-supported agriculture (CSA) programs, by exempting from securities registration any purchase of the future crop of a CSA program.
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Micro-securities: Exempt from registration any public offer or sale of a security if sales of securities do not exceed $100,000, and the aggregate amount of securities sold to any investor does not exceed $100.
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Small loans and investments: Exempt from registration any public offer or sale of a security if the issuer provides basic offering and business information to the public, sales of securities do not exceed $500,000, and the aggregate amount of securities sold to any investor does not exceed $1,000.
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Small Farms and Agricultural Land Trusts: Allow a small farm enterprise or agricultural land trust to raise up to $2,000,000 for the purchase, long-term leasing, purchase of an easement, construction, or improvement of real property to be used for agriculture purposes. Exempt the public offer and sale of securities from registration so long as the issuer receives no more than $5,000 per purchaser, provided that the purchaser signs a statement verifying an annual gross income of at least $50,000 or a total net worth of $100,000 or more. Any purchaser that does not verify such levels of income or net worth may contribute no more than $1,000. All funds raised for the purpose must be held in an escrow account until the issuer has entered into a contract to purchase the land.
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Renewable Energy Projects: This bill would allow nonprofit and cooperative entities to raise up to $2,000,000 for the purchase and installation of solar panels and wind turbines, provided that the issuer and investors meet qualifications similar to those in the above small farm exemption.
Examples:
- SELC's California Local Economies Securities Act (aka LESA, introduced as SB 577 in 2015) contains some of the provisions listed above. You can find a summary of and FAQ on LESA here and updates and info here.
Resources: