REPORT TITLE:
Small business; Financing


DESCRIPTION:
Authorizes small companies to raise capital through small
corporate offerings registration (SCOR), a uniform registration
system that allows small companies to obtain equity financing by
selling common stock directly to the public.

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                            830         
HOUSE OF REPRESENTATIVES                H.B. NO.           
TWENTIETH LEGISLATURE, 1999                                
STATE OF HAWAII                                            
                                                             
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                   A  BILL  FOR  AN  ACT

RELATING TO SECURITIES.



BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:

 1      SECTION 1.  The legislature finds that many small businesses
 
 2 in Hawaii with significant potential are unable to obtain access
 
 3 to equity capital.  Small businesses, particularly new business
 
 4 start-ups, often find it difficult to secure venture capital for
 
 5 financing in their early stages.  Relatively few venture
 
 6 capitalists, for example, are willing to invest in early-stage
 
 7 financing opportunities.  Furthermore, initial public offerings
 
 8 may not be right for most small companies.  The major sources of
 
 9 financing for average new small businesses are owners' savings,
 
10 loans from commercial banks, and funds from relatives and
 
11 friends.
 
12      Many states, however, have allowed a new kind of equity
 
13 financing, the Small Corporate Offerings Registration (SCOR), a
 
14 uniform registration system that allows a company to raise up to
 
15 $1,000,000 by selling common stock directly to the public for at
 
16 least $5 per share.  The legislature finds that SCOR offerings,
 
17 which are registered with the State, cut through many of the
 
18 existing barriers that prevent small companies from obtaining
 
19 financing.  Offerings may be sold to anyone, including family
 

 
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                                     H.B. NO.           
                                                        
                                                        


 1 members, acquaintances, and other interested investors, in
 
 2 amounts as little as $1,000, and shares may be easily resold.
 
 3      Existing state securities laws, however, may prevent the
 
 4 implementation of this uniform registration system.  The federal
 
 5 securities laws governing the private sale of securities are
 
 6 collectively known as "Regulation D".  The State's response to
 
 7 Regulation D is the Uniform Securities Act (Modified), which is
 
 8 contained in chapter 485, Hawaii Revised Statutes.  Pursuant to
 
 9 the Small Business Incentive Act of 1980, the North American
 
10 Securities Administrators Association has developed "Form U-7", a
 
11 question and answer disclosure document for small companies that
 
12 seek to provide a complete listing of all disclosure issues that
 
13 could apply in any small company offering exempt from the
 
14 Securities and Exchange Commission registration under Rule 504 of
 
15 Regulation D.
 
16      The legislature finds that Form U-7 satisfies the prospectus
 
17 required for registration by qualification under the Uniform
 
18 Securities Act; provided that all of the qualifications in the
 
19 instructions for use of the form are fulfilled.  The legislature
 
20 further finds that allowing SCOR registration will assist
 
21 Hawaii's small businesses in obtaining needed financing and is
 
22 consistent with the Hawaii State Planning Act's economic priority
 
23 guidelines under section 226-103(a), Hawaii Revised Statutes, to
 

 
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                                     H.B. NO.           
                                                        
                                                        


 1 seek "a variety of means to increase the availability of
 
 2 investment capital for new and expanding enterprises" to
 
 3 "stimulate economic growth and encourage business expansion and
 
 4 development to provide needed jobs for Hawaii's people and
 
 5 achieve a stable and diversified economy."
 
 6      SECTION 2.  Section 210-1, Hawaii Revised Statutes, is
 
 7 amended by adding a new definition to be appropriately inserted
 
 8 and to read as follows:
 
 9      ""Small corporate offerings registration" means a program
 
10 that allows a small company to obtain equity financing by selling
 
11 common stock not exceeding $1,000,000 to the public at a minimal
 
12 cost per share."
 
13      SECTION 3.  Chapter 485, Hawaii Revised Statutes, is amended
 
14 by adding a new section to be appropriately designated and to
 
15 read as follows:
 
16      "§485-    Prospectus; small corporate offerings registration
 
17 form.  (a)  The prospectus required for registration by
 
18 qualification under section 485-10(b)(3) may be satisfied by the
 
19 Small Corporate Offerings Registration Form (Form U-7) adopted by
 
20 the North American Securities Administrators Association;
 
21 provided that all of the qualifications in the instructions for
 
22 use of the form are fulfilled.
 

 
 
 
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                                     H.B. NO.           
                                                        
                                                        


 1      (b)  The commissioner shall adopt rules pursuant to chapter
 
 2 91 to implement this section."
 
 3      SECTION 4.  New statutory material is underscored.
 
 4      SECTION 5.  This Act shall take effect upon its approval.
 
 5 
 
 6                           INTRODUCED BY:  _______________________