Introduction
The Expanding Access to Capital Act of 2023 (H.R. 2799), or "EACA," is a comprehensive bill aimed at strengthening public markets, supporting small businesses and entrepreneurs, and expanding investment opportunities. Passed by the House of Representatives on March 8, 2024, the bill now awaits a Senate vote. If enacted, it could build on the foundation laid by the JOBS Act by modernizing securities regulations and improving access to both public and private capital markets. Key provisions of the EACA address securities registration exemptions, broaden the accredited investor definition, increase offering limits for certain exemptions, and support venture capital growth.
Why This Matters
For startups and growing businesses, accessing private capital can be a significant challenge. The EACA proposes targeted reforms to make it easier for companies to raise funds in the private markets. This article focuses on three critical proposals within the EACA that are designed to streamline private fundraising and expand funding opportunities:
1. Small Entrepreneurs' Empowerment and Development (SEED) Act of 2023
Title IV of Part B of the EACA, referred to as the SEED Act of 2023, would introduce a new exemption for small offerings, allowing early-stage startups to raise up to $250,000 over a 12-month period. Notably, the bill in its current form does not restrict participation in this type of offering to accredited investors or specific purchaser categories, suggesting that startups could potentially raise funds from a broader pool of investors, including non-accredited individuals. If enacted, this exemption presents a valuable opportunity for entrepreneurs to access essential seed funding through a more streamlined and cost-effective process, minimizing regulatory burdens and fostering early-stage business growth.
2. Increased Offering Limits Under Regulation A+ and Regulation Crowdfunding
Titles V and VII of Part B of the EACA propose substantial increases to existing offering limits:
- Regulation A+: The annual offering limit could rise from $75 million to $150 million, offering growth-stage startups a more viable alternative to a traditional IPO.
- Regulation Crowdfunding: The funding cap could increase from $5 million to $10 million, coupled with relaxed state oversight of secondary trading and simplified portal reporting requirements, making crowdfunding more accessible and efficient for businesses.
3. Expanding the Eligible Investor Pool
Titles II, III, and IV of Part C of the EACA aim to broaden the definition of accredited investors to widen access to private investment opportunities. Proposed expansions include:
- Allowing individuals to invest up to 10% of their net assets or annual income.
- Permitting individuals who attest to understanding private market risks.
- Including clients receiving personalized investment advice from registered investment advisors under the Investment Advisers Act of 1940.
These changes could significantly expand the pool of investors eligible to participate in certain types of exempt offerings, unlocking more capital for businesses.
What The EACA Could Mean for Your Business
If enacted, the EACA could create meaningful new pathways for businesses to raise capital:
- Greater Appeal of Regulation Crowdfunding and Regulation A+: Expanded investment limits and streamlined processes may attract more professional and retail investors.
- Broader Investor Access: A more inclusive accredited investor definition could increase the number of potential investors in private offerings.
- Flexible Fundraising Options: Early-stage companies could benefit from simplified, cost-effective fundraising strategies tailored to their growth needs.
How Our Firm Can Help
Bevilacqua PLLC specializes in helping startups, entrepreneurs, and small businesses access funding opportunities and remain compliant with evolving laws. Whether you're exploring micro-offerings under the proposed SEED Act, raising larger amounts through Regulation A+, or targeting newly eligible accredited investors, we can help you develop individualized legal solutions to support your business growth.
If you are interested in learning more about business planning or accessing the private or public capital markets, please contact Patrick G. Costello at patrick@bevilacquapllc.com. You can also reach us at our general information email at info@bevilacquapllc.com.
See Patrick’s biography to learn more about his background.
About Patrick Costello
Patrick Costello is a Senior Associate at Bevilacqua PLLC, where he advises companies on federal securities law, corporate governance, capital raising, and complex transactions. His practice includes private placements, equity crowdfunding campaigns, Regulation A offerings, registered public offerings, and related disclosure and compliance matters.
Before joining the firm, Patrick served as an Examiner in the Division of Corporation Finance at the U.S. Securities and Exchange Commission. He uses that regulatory background to help clients navigate securities offering requirements, public company disclosure obligations, and practical business planning issues.
Patrick earned his J.D. from Wayne State University Law School and holds an LL.M. in International Business and Economic Law and a Securities and Financial Law Certificate from Georgetown University Law Center.
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This post contains general information. This post is not intended: (a) to convey or constitute legal advice on any subject matter; (b) to establish an attorney-client relationship; or (c) to be a solicitation. Also keep in mind that prior results in a legal matter do not guarantee a similar outcome in another legal matter.
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