Crowdfunding investment platforms are trending, and not just because of the new regulation that came into effect on November 10. We were pleased to provide commentary on this topic for a recent article Forbes magazine.
Excerpt from the article:
The rules for crowdfunding platforms have become stricter as of this week. The Crowdfunding Regulation—a new framework that alters the legal landscape for crowdfunding across the EU—has come into force. Selected platforms that connect investors with project owners will now be required to obtain a licence from the regulator.
In the Czech Republic, this licence should be granted by the Czech National Bank (CNB). Crowdfunding service providers are expected to obtain the new licence by 10 November 2022. However, there is a complication: the Czech law granting the CNB the authority to issue these licences has not yet been approved by the Czech Parliament. Nevertheless, platforms are still expected to comply with the regulation.
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Crowdfunding companies now have time to prepare for the new requirements and to compile the necessary documents and information to apply for the licence. Moreover, the new legislation only applies to specific types of crowdfunding: equity and credit crowdfunding.
Equity crowdfunding is based on the principle of aligning the interests of investors and project owners, where the investor acquires, or may acquire, a direct interest in the project owner, typically in the form of shares or other participatory securities. “This type of financing is uncommon in our country, as it already requires CNB authorisation,” explains Jan Šovar, partner at FINREG PARTNERS.
Credit crowdfunding platforms, on the other hand, function by matching the interests of investors and project owners, where the investor provides a loan to the project owner, which must be repaid in full or in instalments after a set period. According to Šovar, in the Czech Republic, real estate investment platforms are particularly popular in this area.
“However, many of them may not fall under the scope of the regulation at all,” he notes. The new legislation will not apply to non-investment crowdfunding, such as Kickstarter or the Czech platform Hithit, which are categorised as reward-based crowdfunding.
For example, the regulation will not impact platforms that exceed the funding limit of one million euros for a single project or those where there is an ownership link between the platform and the project owners. “The regulation sets additional conditions that determine which platforms are covered,” the lawyer explains. Platforms that do not fall under the regulation can continue to operate under the existing legal regimes.
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The full article is now available on Forbes.cz.
