The Law

MNvest became law in June 2015, creating a powerful new tool for Minnesota companies seeking to raise capital.   The full statute can be found here.  The MNvest rules can be found here.

 

The following is a summary of the law:

 

Basics

  • MNvest is an exemption from registration under federal and Minnesota state securities laws.
  • By meeting the requirements of MNvest, companies may raise capital within Minnesota state borders. This includes making a notice filing, paying a $300 fee, and waiting ten days after making the filing before creating an offering.

Investors

  • Investors may be Minnesota residents only.
  • Non-accredited investors can invest up to $10,000 per offering.
  • Accredited investors are subject to no limits.

Issuers

  • MNvest is only available to entities with their principal office located in Minnesota.
  • Issuers shall be deemed to have their principal place of business in Minnesota if the officers, partners, or managers of the issuer primarily direct, control, and coordinate the activities of the Issuer from within Minnesota
  • Issuers shall be deemed to be doing business within Minnesota if the Issuer satisfies at least one of the following requirements:
    • At least 80% of the entity’s assets must be located in Minnesota
    • At least 80% of the entity’s gross revenues from the operation of a business must be in Minnesota
    • At least 80% of the net proceeds of the offering are used in Minnesota
    • A majority of the Issuer’s employees are based in Minnesota

Issuer Limits

Entities are subject to annual caps on amount of funds raised via MNvest.
  • $2M with audited or reviewed financial statements
  • $1M with internally prepared financial statements

Offerings

  • Must be sold through a registered Portal.
  • Purchaser must provide certification under subdivision 5 concerning risks of investing.
  • Provide disclosure document pursuant to subdivision 4.

Advertising

  • Issuers may publish limited advertisements, so long as they include disclaimers per statute (subd. 4, section 12).

Escrow

  • All investor funds must be deposited into an escrow account within three days of being received.
  • Funds will be held in escrow until the earliest of the following:
    • The funds deposited reach the minimum offering amount
    • Twelve months have passed since the effective date of the offering
    • The offering reaches the expiration date set by the issuer
  • If none of the above are met, the issuer must notify the escrow agent to refund the investors’ money in full.
  • If the minimum offering amount is met, the issuer must issue securities to investors within five days of the funds’ release from escrow to the issuer.

Miscellaneous

  • This summary of the law is no substitute for legal advice.  Please consult an attorney before conducting a securities offering.
  • MNvest became law in June 2015 and was amended in April 2017.
  • MNvest offering opportunities are only available to Minnesota-based companies.
  • All investors must be Minnesota residents.
  • All Minnesota residents can be investors.
  • Offerings must be made online through a “MNvest Portal” registered with the Minnesota Department of Commerce.
  • Issuers may create their own MNvest portal or work with a third-party MNvest Portal.
  • MNvest Portals do not need to be registered broker-dealers.
  • However, only registered broker-dealers can charge “transaction based” fees; Non-broker-dealers can only charge flat fees.
  • Companies must provide detailed disclosure documents that comply with statutory requirements.
  • MNvest Portals are subject to stringent record-keeping requirements and general oversight by the Minnesota Department of Commerce.