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An Easy Way for Texas Companies To Raise Money? A Discussion of the Texas Crowdfunding Exemption (Part 3)

On Behalf of | Dec 17, 2015 | JOBS Act, Private Placements, Raising Capital, Securities Laws, Texas Law Update, Uncategorized

How Should the Offering Be Conducted?

Must Use a website. An offering conducted under the crowdfunding exemption must be made exclusively through an Internet website operated by a registered general dealer or registered TCP.[1] Such website must meet the following requirements:

  • A disclaimer that access to the website and offers and sales of the securities are limited to Texas residents;
  • An affirmative representation by a visitor to the website that the visitor is a Texas resident before they can view information on the website;
  • Evidence of Texas residency before a sale can be made to a prospective purchaser, e., an affirmative representation by the purchaser, supported by proof such as a valid Texas driver license or official identification card, a current Texas voter registration, or general property tax records showing the individual owns and occupies property in Texas as his or her principal residence; and
  • Access to the website by the TSC.[2]

Provide Information to the TSC. As for information to be provided, the website must provide the following to the TSC and potential investors for a minimum of 21 days before any securities are sold:

  • A summary of the offering, including a description of the issuer and its business, its officers and directors, and the securities being offered[3]; and
  • A copy of the disclosure statement consisting of all information material to the offering and a discussion of risk factors that make the offering speculative or risky, including, for example, general description of the issuer’s business, history of the company, management and principal stockholders, how the proceeds will be used, financial information about the issuer, description of the securities being offered, and litigation and legal proceedings, if applicable, as well as the issuer’s financial statements certified by the principal executive officer.[4]

Required Disclosure. Additionally, in the disclosure statement, the issuer must inform all prospective purchasers that:

  • there is no ready market for the securities;
  • the securities are unregistered and, thus, cannot be resold unless registered or exempted;
  • the investors must rely on their examination of the issuer and the terms of the offering; and
  • no regulatory authorities has confirmed the accuracy of the disclosure statement or any other information provided on the website.[5]

Form of Communication. Importantly, all communications between the issuer and prospective purchasers or investors must occur through the website, and the website must provide channels through which potential purchasers and investors can communicate with one another and with representatives of the issuer about the offering, which must be visible to all those with access to the offering materials on the website.[6]

Tombstone Optional. The issuer may also distribute a “tombstone” notice within Texas limited to a statement that the issuer is conducting an offering, the name of the registered general dealer or portal, and a link directing potential investors to the dealer or portal’s website, along with a disclaimer that the offering is limited to Texas residents.[7] The issuer has some flexibility in choosing the medium of such notice, e.g., flyers, Internet, e-mail, or social media, so long as the issuer employs technological measures to limit communications solely to residents of Texas (e.g., by checking the IP address).[8]

This post was a part of a multi-part series on Texas crowdfunding exemption.  You can find the other posts by searching our blogs at In our next post, we will discuss portal requirements.

This posting is intended to be a planning tool to familiarize readers with some of the high-level issues discussed herein.  This is not meant to be a comprehensive discussion and additional details should be discussed with your transaction planners including attorneys, accountants, consultants, bankers and other business planners who can provide advice for your circumstances.  This article should not be treated as legal advice to any person or entity.

Steps have been taken to verify the contents of this article prior to publication.  However, readers should not, and may not, rely on this article.  Please consult with counsel to verify all contents and do not rely solely on this article in planning your legal transactions.

About the Author

Shawn McBride – R. Shawn McBride is the Managing Member of The R. Shawn McBride Law Office, P.L.L.C., which helps clients in legal issues related to starting companies, joint ventures, raising capital from and negotiating with investors and outside General Counsel functions. R. Shawn can be contacted at: 407-517-0064; [email protected], or

[1] 7 Tex. Admin. Code § 139.25(d).

[2] Id. § 139.25(h)(1).

[3] Id. § 139.25(h)(2).

[4] Id. § 139.25(i)(1).  If recent audited or reviewed financial statements have been prepared, they must be provided as well.

[5] Id. § 139.25(i)(2).

[6] Id. § 139.25(g).

[7] Id.

[8] 39 Tex. Reg. 8967, 8971 (Nov. 14, 2014).