NC PACES Act passes and McCrory signs into law

[Chris Martin]

Governor Pat McCrory signed the on Friday. The PACES (Providing Access to Capital for Entrepreneurs and Small business) Act enables a NC startup company to raise up to $1M via crowdfunding ($5,000 cap per contributing person) efforts. Established companies with audited or reviewed financials can raise up to $2M. All issuers need to show evidence that the purchaser is a resident of North Carolina and have their "disclosure statement" (business plan) filed with the Secretary of State. The disclosure includes the minimum and maximum amount of securities and either the percentage ownership of the company represented by the offered securities or the valuation of the company implied by the price of the offered securities. Funds are held in escrow until the minimum target offering amount is reached.

At this moment, 0 full business days since the signing into law, there appears to be no method to file with the secretary of state. Not surprising. I expect it will take months for everyone to "gear up." And if you talk to a NC bank like I did Friday afternoon, they will tell you they have no clue about handling escrow or what forms to file for reporting... to fulfill the requirement: "The bank or depository institution shall notify the Administrator of the receipt of payments for securities and the identity and residence of the investors."

So here we are. Brand new territory.

As far as real estate investing goes, I don't expect the PACES Act to have a substantial impact. With limits of $5,000 for non-accredited parties, an issuer (e.g. a company doing flips trying to raise capital) will need a bunch of people (NC residents) to get enough funding. In a world where "deals" move quickly, the issuer needs to have PACES commitments ahead of extending an offer. While it can be done for REI businesses, I expect other non-real estate industries to represent the bulk of PACES filings.

So post your thoughts. Do you see the PACES Act having a big impact on you? on NC REI?