The Fix Crowdfunding Act, sponsored by Congressman Patrick McHenry, passed the House of Representatives in summer 2016 and subsequently was sent to the Senate, but was never passed by the  Senate. This bill was intended to remedy some of the deficiencies in the equity crowdfunding law. Two of the original propositions in the amendment, to increase the dollar amount of the exemption to $5 million and to clarify the liability of the funding portal, did not survive committee. Two provisions which did  pass increases the threshold from  exemption from registration under the Securities Exchange Act substantially, and also permitted the use of the Special Purpose Vehicle.

An SPV is simply the use of an intermediate entity in which all the crowdfunding investors hold a pro rata interest; the SPV in turn is the direct owner of the company’s shares or other securities. This simplifies matters substantially for the company who has raised money through crowdfunding, since they only need to solicit votes or other consents from one entity rather than the hundreds or thousands of individual crowdfunding investors. This often becomes critical when the company needs to seek follow-up capital, and might need the consent of the crowdfunding investors.

The industry hopes that the new Congress will either pass this bill, or better yet, pass a new bill with all the originally proposed fixes.

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