Monday, December 22, 2014

Invest Tennessee - Student-Initiated Intrastate "Crowdfunding" Legislation

Effective as of January 1. 2015, Tennessee will allow Tennessee corporations to engage in intrastate offerings of securities to Tennessee residents over the internet without registration.  The new law, adopted earlier this year, is the direct result of a law-student-led movement.  The key student leader was one of my students, and he kept me informed about the effort as it moved along.  (I was called upon for advice and commentary from time to time, but the bill is all their work.)

In my experience, this kind of effort--a student-initiated, non-credit, extracurricular engagement in business law reform--is almost unheard of.  I was intrigued by the enterprise and impressed by its success.  As a result, I asked the student leader, Brandon Whiteley, now an alumnus, to send me some of his perceptions about drafting and proposing the bill and getting it passed.  

This is the first in a series of three posts that feature Brandon's observations on the legislative process, the key influences on the bill, and the importance of communication.  This post highlights his commentary on the legislative process (which I have edited minimally with his consent).  I think you'll agree that his wisdom and humor both shine through in this first installment (as well as the others).  His organizational capabilities also are evident throughout.

On Process

Working with the Tennessee legislature, by its structure and procedures, requires appropriate timing. The General Assembly convenes in January and ends at the will of the legislature, typically from April to June. The entirety of the formal legislative process occurs within this often frantic period, although significant amounts of work occur in the late fall in preparation for the upcoming Session. Therefore, prudent actors within the process do most of their preparation during the fall.

Preparation includes initial research on issues and people, constituent outreach (those people/institutions affected by your legislation should be as involved and informed as possible!), coalition building, and legislator meetings to gather bill sponsors. Tennessee, like most states, uses a bicameral system similar to that used in the U.S. Congress. One House and one Senate sponsor will be needed for a bill, but legislators commonly co-sponsor legislation that they seek to promote or influence.

For our legislation, at first called TennEquity and later changed to the Invest Tennessee Exemption, we deviated only slightly from this timeline. Most of the research was ad hoc based upon our priorities at any given moment. Our student team did not come together until January given the stress of final exams in November and December – and seasonal stresses affect plenty of industries, so bear that in mind for whatever your interest may be. Our research on the people involved occurred in November, legislative research in December and January, and ongoing issue-specific research went on up until the Spring Break Summit where the penultimate bill was selected and amended.

I expected to be more engaged with the formal legislative process, up to attending House and Senate committee meetings to promote its passage. Supporters of bills often speak before committees to provide context, expertise, or opinions. However, the popularity of the Invest Tennessee Exemption’s economic development theme, the high reputation of the bill’s sponsors, and the legislation’s complexity facilitated its progress. Near the end of the session, the House sponsor made an adjustment unbeknownst to most of the interested parties of the bill during session, immediately prior to final passage. The small change deviated from an agreement from the Spring Break Summit, but did not fundamentally alter the bill. This sort of change comes as part of the chaos of the ordeal, and anyone interested in legislation should embrace it – or brace for it.

Fortunately, our diligent legislative sponsors and their staffs provided excellent support and hopped on board to provide direction throughout the process. Towards the end, as our Senate sponsor, Senator Doug Overbey, became unexpectedly busier, Representative Mark White’s legislative aide Craig Hodge became the go-to bridge for our Knoxville team and everyone in Nashville, relieving our team of amateurs from needing to keep in constant contact with LaunchTN, the state Securities Division, and the other legislative offices. Without that kind of help organizing around the legislation, we would have needed to do it ourselves.

To keep this pithy and interesting, Brandon summarizes many complex aspects of the process here, but a reader can gain much information even from this summary.  Brandon had prior legislative experience, so much of the process was familiar to him on some level.  Nevertheless, I can assure you that drafting a bill, getting it sponsored, and getting it through the Tennessee legislature is a reasonably formidable task.

I had the opportunity to join Brandon for breakfast yesterday in his home town of Memphis, Tennessee (after having attended the wedding of a UT Law alumna on Saturday night).  He remains excited about this initiative, is writing a piece on it for the Tennessee Bar Journal, and (having passed the bar this summer) is looking for a job in (you guessed it) government--including, but not limited to, legislative affairs.  I would hire the guy in a heartbeat.

Stayed tuned for Brandon's observations on influence and communication in future posts.  If you'd like to discuss the Invest Tennessee Exemption with him, his email address is  Of course, comments and questions also are welcomed here.

Business Associations, Corporate Finance, Current Affairs, Entrepreneurship, Joan Heminway, Law School, Securities Regulation, Teaching | Permalink


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