The aim for a European regime for crowdfunding

• Netherlands

• Banking and finance

22-01-2014

Crowdfunding, an upcoming manner to finance projects, start-ups and SMEs by means of - for example - donations, granting of loans and making investments, serves as an alternative to existing ways of financing offered by banks, venture capital funds and business angels.

Crowdfunding is in the spotlights more and more. In the Netherlands, but also in the rest of Europe. As already pointed out in our newsletter ‘The “10 commandments” of crowdfunding’, crowdfunding can be subjected to financial regulatory prohibitions and license requirements depending on the structure chosen. This regulatory regime mainly serves to protect the investors.

The shattered laws and regulations which may be applicable to a crowdfunding initiative is recognized as one of the main objections raised in the market by stakeholders. The Dutch regulatory regimes does not provide a clear view which requirements may apply; this highly depends on the manner in which the crowdfunding initiative is structured. In addition, without having a harmonized European regime applicable to crowdfunding yet, this alternative financing method becomes even more ambiguous cross border.

The general consensus seems to be that it is desirable to develop univocal laws and regulations which are applicable to crowdfunding on a harmonized basis in Europe. The European Commission recently requested input from the market via a consultation on crowdfunding. We expect that a summary of the market responses as well as, hopefully, a proposal of the European Commission how to facilitate the crowdfunding market shall be published shortly. Also ESMA, the European Securities and Markets Authority, aims at publishing best practices on the basis of similarities and differences in the regulatory treatment of crowdfunding in the Member States. This follows from a recent presentation held by ESMA during a crowdfunding workshop which was organized by the European Commission.

From a recent report in respect of synergies between crowdfunding and business angels/informal investors, which report was prepared at the request of the Dutch Ministry of Economic Affairs (only available in Dutch), it follows that crowdfunding has the attention of the Dutch government as well. The report briefly touches upon the role that the government can take in developing crowdfunding in the Netherlands. Stakeholders particularly would welcome a more standardized manner to manage third party accounts. Although the Dutch regulators emphasize that crowdfunding may be subjected to regulatory requirements depending on the structure chosen, it is also recognized that volumes are still limited in the Netherlands at this stage. The regulators do stress the importance of an open dialogue before exploiting crowdfunding initiatives.

Eversheds is pre-eminently fit to assist you in structuring your crowdfunding ideas in a legally accurate manner contributing to a trustworthy and a high quality crowdfunding platform.