REPORT TITLE:
Small Business; Financing


DESCRIPTION:
Authorizes small companies to raise capital through small
corporate offering registration (SCOR), a uniform registration
system that allows small companies to obtain equity financing by
selling common stock directly to the public.  Defines SCOR.
Identifies registration form to be utilized by SCOR.  Clarifies
that DCCA is to administer the SCOR program.

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                        
HOUSE OF REPRESENTATIVES                H.B. NO.12         
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 great potential are unable to obtain access to
 
 3 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, and initial public offerings may not be
 
 8 right for most small companies.  The major sources of financing
 
 9 for average new small businesses are owners' savings, loans from
 
10 commercial banks, and funds from relatives and friends.
 
11      Many states, however, have allowed a new kind of equity
 
12 financing, the Small Corporate Offerings Registration (SCOR), a
 
13 uniform registration system that allows a company to raise up to
 
14 $1,000,000 by selling common stock directly to the public for at
 
15 least $5 per share.  The legislature finds that SCOR offerings,
 
16 which are registered with the State, cut through many of the
 
17 existing barriers that prevent small companies from obtaining
 
18 financing.  Offerings may be sold to anyone, including family
 
19 members, acquaintances, and other interested investors, in
 

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

 
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 1 "stimulate economic growth and encourage business expansion and
 
 2 development to provide needed jobs for Hawaii's people and
 
 3 achieve a stable and diversified economy.
 
 4      SECTION 2.  Section 485-1, Hawaii Revised Statutes, is
 
 5 amended by adding a new definition to be appropriately inserted
 
 6 and to read as follows:
 
 7      ""Small corporate offerings registration" means a program
 
 8 that allows a small company to obtain equity financing by selling
 
 9 common stock not to exceed $1,000,000 to the public at a minimal
 
10 cost per share."
 
11      SECTION 3.  Chapter 485, Hawaii Revised Statutes, is amended
 
12 by adding a new section to be appropriately designated and to
 
13 read as follows:
 
14      "§485-    Prospectus; small corporate offerings registration
 
15 form.  (a)  The prospectus required for registration by
 
16 qualification under section 485-10(b)(3) may be satisfied by the
 
17 Small Corporate Offerings Registration Form (Form U-7) adopted by
 
18 the North American Securities Administrators Association if all
 
19 of the qualifications in the instructions for use of the form are
 
20 fulfilled.
 
21      (b)  The commissioner shall adopt rules, orders, and forms
 
22 pursuant to chapter 91 to implement this section."
 
23      SECTION 4.  New statutory material is underscored.
 

 
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 1      SECTION 5.  This Act shall take effect upon its approval.
 
 2 
 
 3                           INTRODUCED BY:  _______________________