An Act To Increase Funding for Start-ups
Maine Legislature, Session 126, LD 1512
Committee: Insurance and Financial Services
Sponsors: ALFOND
Amends: 32 MRSA §16202

Legislative Document 
No. 1512 
S.P. 568 
In Senate, May 7, 2013 
An Act To Increase Funding for Start-ups 
Reference to the Committee on Insurance and Financial Services suggested and ordered 
printed. 
DAREK M. GRANT 
Secretary of the Senate 
Presented by President ALFOND of Cumberland. 
Be it enacted by the People of the State of Maine as follows: 
Sec. 1.  32 MRSA §16202, sub-§25, as enacted by PL 2005, c. 65, Pt. A, §2, is 
amended to read: 
25.  Investments in viatical or life settlement contracts. Any offer or sale of an 
investment in a viatical or life settlement contract, if: 
A.  The underlying viatical or life settlement transaction with the viator was not in 
violation of the Viatical and Life Settlements Act; 
B.  Such disclosure documents as the administrator, by rule or order, requires are 
delivered to each offeree or purchaser; and 
C.  Prior to any offer in this State, a notice specifying the terms of the offer is filed 
with the administrator together with a consent to service of process complying with 
section 16611, signed by the issuer, and a nonrefundable filing fee of $300 for each 
type or class of security being offered in this State and the administrator does not by 
order disallow the exemption within the next 5 full business days; or 
Sec. 2.  32 MRSA §16202, sub-§26, as amended by PL 2009, c. 500, §1, is 
further amended to read: 
26.  Nonpublic offerings under 4(2).  A security offered in a nonpublic offering 
under Section 4(2) of the federal Securities Act of 1933, 15 United States Code, Section 
77d(2) if, no later than 15 days after the first sale in this State, a notice on "Form D," as 
promulgated by the Securities and Exchange Commission, is filed with the administrator 
together with a consent to service of process complying with section 16611, signed by the 
issuer, and the payment of a nonrefundable filing fee of $300 for each type or class of 
security sold. If the Form D includes a consent to service of process, a separate document 
need not be filed for this purpose, and if the consent to service of process on the Form D 
is executed in a manner accepted by the Securities and Exchange Commission, it is 
deemed to comply with the requirement in this section and section 16611, subsection 1 
that the consent be signed. An additional nonrefundable late filing fee of $500 must be 
paid for a filing made between 16 and 30 days after the first sale in this State.; or 
Sec. 3.  32 MRSA §16202, sub-§27 is enacted to read: 
27.  Maine seed capital exemption.  An issuer transaction or sale if: 
A.  The issuer of the security is a business entity formed under the laws of the State 
and registered with the Secretary of State;  
B.  The transaction meets the requirements of the federal exemption for intrastate 
offerings in Section 3(a)(11) of the federal Securities Act of 1933, 15 United States 
Code, Section 77c(a)(11), and 17 Code of Federal Regulations, Section 230.147 
(2013); 
C.  The sum of all cash and other consideration to be received for all sales of the 
security in reliance upon this exemption does not exceed: 
(1)  If the issuer has not undergone and provided the documentation resulting 
from a financial audit that was performed the previous year and that met 
generally accepted accounting principles, $1,000,000 less the aggregate amount 
received for all sales of securities by the issuer within the 12 months before the 
first offer or sale made in reliance upon the exemption provided by this 
subsection; or 
(2)  If the issuer has undergone and provided the documentation resulting from a 
financial audit that was performed the previous year and that met generally 
accepted accounting principles, $2,000,000 less the aggregate amount received 
for all sales of securities by the issuer within the 12 months before the first offer 
or sale made in reliance upon the exemption provided by this subsection. 
Beginning in 2018, and every 5 years thereafter, the administrator shall adjust the 
maximum amount of cash and other consideration allowed under this paragraph to 
reflect the cumulative change in the United States Department of Labor, Bureau of 
Labor Statistics Consumer Price Index; 
D.  The issuer has not accepted more than $2,000 from any single purchaser, unless 
the purchaser is an accredited investor as defined in 17 Code of Federal Regulations, 
Section 230.501 (2013).  Beginning in 2018, and every 5 years thereafter, the 
administrator shall adjust the maximum amount the issuer may accept from a single 
purchaser to reflect the cumulative change in the United States Department of Labor, 
Bureau of Labor Statistics Consumer Price Index; 
E.  Before the use of any general solicitation or the 25th sale of the security, 
whichever occurs first, the issuer files a notice with the administrator in writing or in 
electronic form prescribed by the administrator that: 
(1)  Specifies that the issuer is conducting an offering in reliance upon the 
exemption provided by this subsection; and 
(2)  Contains the names and addresses, including Internet website addresses, of 
the issuer and all persons who will be involved in the offer or sale of securities on 
behalf of the issuer, and the bank or other depository institution in which investor 
funds will be deposited; 
F.  The issuer is not, either before the offering or as a result of the offering, an 
investment company, as defined in Section 3 of the federal Investment Company Act 
of 1940, 15 United States Code, Section 80a-3, or subject to the reporting 
requirements of Section 13 or 15(d) of the federal Securities Exchange Act of 1934, 
United States Code, Section 78m and 78o(d); 
G.  The issuer informs all purchasers that the securities have not been registered 
under this chapter and that the securities are subject to the limitation on resales 
contained in 17 Code of Federal Regulations, Section 230.147(e) (2013); 
H.  The issuer requires from all purchasers in writing in a separate written document 
by the time of the sale the following statement: "I acknowledge that I am investing in 
a high-risk, speculative business venture, that I may lose all of my investment and 
that I can afford the loss of my investment.  I understand that this offering has not 
been reviewed by the State and that no authority has expressed an opinion on the 
merits of this offering."  An investor who has signed the acknowledgment contained 
in this paragraph may not bring an action against the company or any director or 
officer of the company except in the case of fraud or breach of fiduciary duty, as long 
as the issuer is able to produce the signed acknowledgement; 
I.  If the sale of securities is by an Internet website, the Internet website requires as a 
condition of buyer registration on the Internet website evidence or certification that 
the buyer is a resident of the State.  An issuer registering to offer a security on an 
Internet website under this paragraph must provide evidence or a certification that the 
issuer is organized under and authorized to do business within the State at the time of 
registration. The administrator may inspect or review any Internet website under this 
paragraph.  Prior to offering an investment opportunity to residents of this State, an 
Internet website operator shall inform the administrator of the existence of the 
Internet website and shall give the administrator access to the Internet website; 
J.  The issuer provides a quarterly report, free of charge, to the issuer's shareholders 
until there are no securities issued under this subsection outstanding.  An issuer may 
satisfy the reporting requirement of this paragraph by making the information 
available on an Internet website if the information is made available within 45 days 
of the end of each fiscal quarter and remains available for at least 60 days.  An issuer 
must provide a printed copy of the report to any shareholder upon request.  The report 
must contain: 
(1)  The amount of compensation received by each director and executive officer, 
including cash compensation earned since the previous report and on an annual 
basis and any bonuses, stock options, other rights to receive securities of the 
issuer or an affiliate of the issuer or other compensation received; and 
(2)  An analysis of the business operations and financial condition of the issuer; 
and  
K.  Within 5 years prior to the offering, the issuer or a person affiliated with the 
issuer or the offering: 
(1)  Has not filed a registration statement that is the subject of a pending 
proceeding or examination under 15 United States Code, Section 77h and has not 
been the subject of a refusal order or stop order under 15 United States Code, 
Section 77h; 
(2)  Is not subject to a pending proceeding under 17 Code of Federal Regulations, 
Section 230.258 (2013) or to an order entered under 17 Code of Federal 
Regulations, Section 230.258 (2013); 
(3)  Has not been convicted of a felony or misdemeanor in connection with the 
purchase or sale of a security or involving the making of a false filing related to 
the offer or sale of a security; 
(4)  Is not subject to an order, judgment or decree of a court of competent 
jurisdiction or regulatory authority, including non-United States regulatory 
authorities, preliminarily, temporarily or permanently restraining or enjoining 
that person from engaging in or continuing conduct or a practice in connection 
with the purchase or sale of a security or involving the making of a false filing 
related to the offer or sale of a security; 
(5)  Is not subject to a United States Postal Service false representation order 
entered under 39 United States Code, Section 3005 and is not subject to a 
temporary restraining order or preliminary injunction entered under 39 United 
States Code, Section 3007 with respect to conduct alleged to have violated 39 
United States Code, Section 3005. 
The provisions of this paragraph do not apply if, upon a showing of good cause and 
without prejudice to any other action by the administrator, the administrator 
determines that it is not necessary under the circumstances that an exemption be 
denied, and the issuer establishes that it made factual inquiry into whether any 
disqualification existed under this paragraph but did not know, and in the exercise of 
reasonable care could not have known, that a disqualification existed under this 
paragraph.  The nature and scope of the inquiry required by an issuer varies based on 
the circumstances of the issuer and the other offering participants. 
The exemption provided in this subsection may not be used in conjunction with any other 
exemption under this chapter, except that offers and sales to controlling persons do not 
count toward the limitation in paragraph C.  For purposes of this subsection, "controlling 
person" means an officer, director, partner or trustee, or an individual occupying a  
similar status or performing similar functions with respect to the issuer or to a person 
owning 10% or more of the outstanding shares of any class or classes of securities of the 
issuer. 
The administrator shall adopt rules to protect investors who purchase securities under this 
subsection.  Rules adopted pursuant to this subsection are routine technical rules as 
defined in Title 5, chapter 375, subchapter 2-A. 
SUMMARY 
The purpose of this bill is to promote and encourage the growth of Maine small 
businesses by facilitating the ability of a business to raise capital by selling small amounts 
of equity to a wider pool of small investors with fewer restrictions.  This bill exempts 
from existing restrictions regarding registration and advertising an issuer transaction or 
sale if the issuer transaction or sale meets certain conditions, including: 
1.  The issuer of the security must be a business entity formed and registered under 
Maine law; 
2.  The purchasers of the securities must be Maine residents; 
3.  The size of the offering may not exceed $1,000,000 if the issuer has not 
undergone, and provided documentation from, a financial audit in the previous year; 
4.  The size of the offering may not exceed $2,000,000 if the issuer has undergone, 
and provided documentation from, a financial audit in the previous year; 
5.  The issuer may not accept more than $2,000 from any single purchaser unless the 
purchaser is an accredited investor under rules adopted by the federal Securities and 
Exchange Commission; and 
6.  The issuer requires from all purchasers a written acknowledgement that the 
purchaser assumes the risks associated with the investment.