If the U.S. House of Representatives has its way, big changes are on the horizon for private offerings.  In an effort to enhance the ability of small businesses to raise capital, the House has now passed four bills that reduce some of the restrictions.  The bills are as follows:

1)  Entrepreneurial Access to Capital Act (HR 2930) – This bill would allow businesses to accept and pool donations of up to $1 million (or $2 million in some instances) without requiring SEC registration.  This concept is known as crowdfunding, which involves the pooling of small contributions in an effort to help others attain a specific goal. If this bill were to become law, it would preempt state law, would permit access to capital sources that previously were untapped, and would prevent the new shareholders from being counted toward the SEC’s 500 shareholder limit for non-public companies.

2)  The Access to Capital for Job Creators Act (HR 2940) – This bill would remove the general solicitation and advertising ban from SEC Rule 506 under Regulation D.  This change would permit small businesses to solicit investments from accredited investors throughout the U.S. and globally.  Like the crowd funding bill, HR 2940 would provide greater access to capital sources.  It would also modernize the way Regulation D offerings are conducted by allowing businesses to directly advertise to accredited investors.

3)  HR 1965 – This bill with no name would increase the number of shareholders bank holding companies and banks may have before requiring SEC registration.  Currently, companies are required to go public if they have 500 or more shareholders and have $10 million or more in assets.  The bill would allow community bank holding companies to have up to 2,000 investors before requiring registration.  As such, community banks would have greater access to capital without requiring added SEC regulation.

4)  Small Company Capital Formation Act (HR 1070) – This bill would increase the limit on SEC Regulation A offerings from $5 million to $50 million.  Regulation A provides a streamlined way for small businesses to raise capital and has fewer requirements than the typical SEC registered offering, but Regulation A has not kept up with the times.  Very few companies view Regulation A as a viable alternative because the current $5 million cap generally does not provide sufficient capital.  The bill would allow small businesses to raise up to $50 million, which makes Regulation A a viable alternative again.

All four of these votes received only token opposition.  Now, the bills will be considered by the Senate.  President Obama has already called for passage of the crowd funding exemption and raising the number of shareholders bank holding companies may have before requiring SEC registration.  There is, however, significant opposition at the state-level to the crowd funding exemption.  Although these bills have some legislative hurdles to clear, it does appear that, rather soon, it will be easier to raise capital in private offerings.