On 10 November 2021, the new Regulation (EU) 2020/1503 of the European Parliament and of the Council of 7 October 2020 will come into effect, introducing new rules for so-called crowdfunding, which is an increasingly popular form of alternative financing for various types of borrowers.
The aim of this Regulation, which is conceived as an exception to the Markets in Financial Instruments Directive (MiFID II) and the regulation of public offerings of securities (Prospectus Regulation) and which will apply to the public offering of transferable securities and debt financing (various forms of credits and loans) through online platforms, is to harmonize the legislation in the individual EU member countries and to simplify the cross-border provision of crowdfunding services, whereas national legal systems previously did not contain any specific legislation in this area. However, the Regulation is limited to those crowdfunding projects in which an entrepreneur (as opposed to consumers) seeks funding, and then only for amounts up to of EUR 5 million over 12 calendar months per individual project.
The Regulation introduces a new licensed category of crowdfunding service providers and stipulates the conditions under which crowdfunding services may be provided.
Under the regulation, it will be necessary to comply with the rules laid down in order to protect investors, fulfill AML obligations, the duty of prudence, as well as other prerequisites; however, none of them are in any way unusual in the capital market.
The crowdfunding platforms affected by the new regulation will be required to apply for a permit by 10 November 2022 at the latest. It is possible that this deadline may be extended.
If you are interested in further information, we are happy to help.
Regulation (EU) 2020/1503 of the European Parliament and the Council of 7 October 2020
27th July 2021
14th September 2021
20th September 2021
20th September 2021