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HF 379

2nd Engrossment - 80th Legislature (1997 - 1998) Posted on 12/15/2009 12:00am

KEY: stricken = removed, old language.
underscored = added, new language.

Bill Text Versions

Introduction Posted on 02/03/1997
1st Engrossment Posted on 03/03/1997
2nd Engrossment Posted on 05/16/1997

Current Version - 2nd Engrossment

  1.1                          A bill for an act 
  1.2             relating to commerce; regulating securities; 
  1.3             authorizing small corporate offering registrations; 
  1.4             proposing coding for new law in Minnesota Statutes, 
  1.5             chapter 80A. 
  1.7      Section 1.  [80A.115] [SMALL CORPORATE OFFERING 
  1.9      Subdivision 1.  [FILING REQUIREMENTS.] A security meeting 
  1.10  the conditions set forth in this section may be registered by 
  1.11  filing a small corporate offering registration form otherwise 
  1.12  known as a form U-7 adopted by the North American Securities 
  1.13  Administrators Association as a uniform state securities 
  1.14  registration form. 
  1.15     Subd. 2.  [AVAILABILITY.] Registration under this section 
  1.16  is available only to the issuer of the securities and not to an 
  1.17  affiliate of that issuer or to any other person for resale of 
  1.18  the issuer's securities.  The issuer must be a corporation 
  1.19  organized under the laws of one of the states or possessions of 
  1.20  the United States.  Registration under this section is not 
  1.21  available to any of the following issuers: 
  1.22     (1) an issuer that engages in or proposes to engage in the 
  1.23  business of petroleum exploration or production or mining or 
  1.24  other extractive industries; 
  1.25     (2) an investment company, including a mutual fund; 
  2.1      (3) an issuer subject to the reporting requirements of 
  2.2   section 13 or 15(d) of the Securities Exchange Act of 1934; 
  2.3      (4) a direct participation program; 
  2.4      (5) a development stage company that either has no specific 
  2.5   business plan or purpose or has indicated that its business plan 
  2.6   is to engage in a merger or acquisition with an unidentified 
  2.7   company or companies or other entity or person; and 
  2.8      (6) an issuer seeking to register a debt offering unless 
  2.9   the commissioner finds that the issuer has demonstrated a 
  2.10  reasonable ability to service the debt. 
  2.11     Subd. 3.  [DISQUALIFICATION.] (a) An issuer is disqualified 
  2.12  from registration under this section if the issuer or any of its 
  2.13  officers, directors, ten-percent stockholders, promoters, or any 
  2.14  selling agents of the securities to be offered, or any officer, 
  2.15  director, or partner of the selling agent: 
  2.16     (1) has filed a registration statement that is the subject 
  2.17  of a currently effective registration stop order entered under a 
  2.18  federal or state securities law within five years before the 
  2.19  filing of the small corporate offering registration application; 
  2.20     (2) has been convicted within five years before the filing 
  2.21  of the small corporate offering registration application of a 
  2.22  felony or misdemeanor in connection with the offer, purchase, or 
  2.23  sale of a security or a felony involving fraud or deceit, 
  2.24  including, but not limited to, forgery, embezzlement, obtaining 
  2.25  money under false pretenses, larceny, or conspiracy to defraud; 
  2.26     (3) is currently subject to a state administrative 
  2.27  enforcement order or judgment entered by a state securities 
  2.28  administrator or the securities and exchange commission within 
  2.29  five years before the filing of the small corporate offering 
  2.30  registration application, or is subject to a federal or state 
  2.31  administrative enforcement order or judgment in which fraud or 
  2.32  deceit, including, but not limited to, making untrue statements 
  2.33  of material facts or omitting to state material facts, was found 
  2.34  and the order or judgment was entered within five years before 
  2.35  the filing of the small corporate offering registration 
  2.36  application; 
  3.1      (4) is currently subject to an order, judgment, or decree 
  3.2   of a court of competent jurisdiction temporarily restraining or 
  3.3   enjoining, or is subject to an order, judgment, or decree of a 
  3.4   court of competent jurisdiction, permanently restraining or 
  3.5   enjoining the party from engaging in or continuing any conduct 
  3.6   or practice in connection with the purchase or sale of any 
  3.7   security or involving the making of a false filing with a state 
  3.8   or with the securities and exchange commission entered within 
  3.9   five years before the filing of the small corporate offering 
  3.10  registration application; or 
  3.11     (5) is subject to a state's administrative enforcement 
  3.12  order, or judgment that prohibits, denies, or revokes the use of 
  3.13  an exemption for registration in connection with this offer, 
  3.14  purchase, or sale of securities. 
  3.15     Clauses (1) to (4) do not apply if the person subject to 
  3.16  the disqualification is duly licensed or registered to conduct 
  3.17  securities-related business in the state in which the 
  3.18  administrative order or judgment was entered against the person 
  3.19  or if the dealer employing the party is licensed or registered 
  3.20  in this state and the form BD filed in this state discloses the 
  3.21  order, conviction, judgment, or decree relating to the person.  
  3.22     (b) No person disqualified under this subdivision may act 
  3.23  in any capacity other than that for which the person is licensed 
  3.24  or registered.  A disqualification under this subdivision is 
  3.25  automatically waived if the state securities administrator or 
  3.26  federal agency that created the basis for disqualification 
  3.27  determines upon a showing of good cause that it is not necessary 
  3.28  under the circumstances to deny the registration. 
  3.29     Subd. 4.  [CONDITIONS.] In order to register under this 
  3.30  section, all of the following conditions must be satisfied: 
  3.31     (1) the offering price for common stock and the exercise 
  3.32  price, if the securities offered are options, warrants, or 
  3.33  rights for common stock, and the conversion price if the 
  3.34  securities are convertible into common stock must be equal to or 
  3.35  greater than $5 per share; and 
  3.36     (2) the aggregate offering price of the securities offered, 
  4.1   within or outside this state, may not exceed $1,000,000 less the 
  4.2   aggregate offering price of all securities sold within the 12 
  4.3   months before the start of and during the offering of the 
  4.4   securities under securities and exchange commission Rule 504 in 
  4.5   reliance on an exemption under section 3(b) of the Securities 
  4.6   Act of 1933.  The issuer may not split its common stock, or 
  4.7   declare a stock dividend for two years after effectiveness of 
  4.8   the registration, except that in connection with a subsequent 
  4.9   public offering, the issuer may upon application and consent of 
  4.10  the commissioner take this action. 
  4.11     Subd. 5.  [CONTENTS OF REGISTRATION FORM.] The small 
  4.12  corporate offering registration form (form U-7) must comply with 
  4.13  and contain all exhibits required by the Instructions for Use of 
  4.14  Form U-7 as adopted by the North American Securities 
  4.15  Administrators Association.  The registration must include 
  4.16  financial statements prepared in accordance with generally 
  4.17  accepted accounting principles.  An issuer that has not 
  4.18  conducted significant operations shall provide statements of 
  4.19  receipts and disbursements in lieu of statements of income. 
  4.20  Interim financial statements may be unaudited.  All other 
  4.21  financial statements shall be audited by independent certified 
  4.22  public accountants.  Financial statements may be unaudited if 
  4.23  reviewed by independent certified public accountants in 
  4.24  accordance with the accounting and review service standards 
  4.25  promulgated by the American Institute of Certified Public 
  4.26  Accountants and: 
  4.27     (1) the issuer has not previously sold securities through 
  4.28  an offering involving the general solicitation of prospective 
  4.29  investors by means of advertising, mass mailings, public 
  4.30  meetings, cold call telephone solicitation, or any other method 
  4.31  directed toward the public; 
  4.32     (2) the issuer has not been previously required under 
  4.33  federal or state securities laws to provide audited financial 
  4.34  statements in connection with any sale of its securities; and 
  4.35     (3) the aggregate amount of all previous sales of 
  4.36  securities by the issuer, exclusive of debt financing with banks 
  5.1   and similar commercial lenders does not exceed $1,000,000. 
  5.2      Subd. 6.  [STOP ORDERS.] The commissioner may in the 
  5.3   commissioner's discretion issue a stop order for any of the 
  5.4   following additional reasons: 
  5.5      (1) the issuer's principal place of business is not in this 
  5.6   state or in North Dakota, South Dakota, Iowa, or Wisconsin; 
  5.7      (2) at least 50 percent of the issuer's full-time employees 
  5.8   are not located in this state or in North Dakota, South Dakota, 
  5.9   Iowa, or Wisconsin; or 
  5.10     (3) at least 80 percent of the net proceeds of the offering 
  5.11  are not going to be used in connection with the operations of 
  5.12  the issuer in this state or in North Dakota, South Dakota, Iowa, 
  5.13  or Wisconsin.  
  5.14     Subd. 7.  [SUITABILITY.] The commissioner may, in the 
  5.15  commissioner's discretion, require investors in a particular 
  5.16  offering to meet suitability standards relating to annual gross 
  5.17  income, net worth, or other factors to determine the suitability 
  5.18  of the investment for the investor. 
  5.19     Subd. 8.  [FINANCIAL REPORTING REQUIREMENTS.] The issuer 
  5.20  shall deliver to investors on an annual basis financial 
  5.21  statements prepared in accordance with generally accepted 
  5.22  accounting principles. 
  5.23     Subd. 9.  [EFFECTIVE DATE.] A registration statement under 
  5.24  this section becomes effective when the commissioner so orders. 
  5.25     Sec. 2.  [EFFECTIVE DATE.] 
  5.26     Section 1 is effective the day following final enactment.