New rules to boost crowdfunding across EU borders
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(BRUSSELS) - The EU Parliament and Council reached provisional agreement Wednesday evening on EU-wide rules to help crowdfunding services function smoothly and foster cross-border business funding.
The uniform set of criteria will apply to all European Crowdfunding Service Providers (ECSP) up to offers of EUR 5,000,000 (from EUR 1,000,000 proposed by the Commission), calculated over a period of 12 months per project owner, the agreed text says.
To enable small companies or start-ups to use the crowdfunding option, the shares of certain private limited liability companies, which are freely transferable on the capital markets, were included in the scope of the legislation.
The legislation will be accompanied with additional safeguards and clarification on how investors should be informed of the consequences of their choices.
The agreement was welcomed by the Commission. "This is an important source of alternative financing for many innovative European entrepreneurs and start-ups, which may struggle to access traditional financing channels," said Economy vice-president Valdis Dombrovskis: "An EU crowdfunding licence would help crowdfunding platforms scale up in Europe. This will allow investors to match up with companies from all over the EU, bringing more opportunities for firms and entrepreneurs to pitch their ideas to a wider base of investors."
Investors would be provided with a key investment information sheet (KIIS) drawn up by the project owner for each crowdfunding offer, or at platform level. Crowdfunding service providers would need to give clients clear information about the financial risks and charges they may incur, including insolvency risks and project selection criteria.
In addition, investors identified as non-sophisticated would be offered more in-depth advice and guidance, including on their ability to bear losses and a warning in case their investment exceeds either 1000 EUR or 5% of their net worth, followed by a reflection period of four calendar days.
Negotiators decided that a prospective ECSP would need to request authorisation from the national competent authority (NCA) of the member state in which they are established. Through a notification procedure in a member state, ECSP would also be able to provide their services cross-border. Supervision would also be carried out by NCAs with the European Securities and Markets Authority (ESMA) facilitating and coordinating cooperation between member states. ESMA's role, and to a lesser extent that of the EBA, was strengthened in areas such as binding dispute mediation, data collection from NCAs in order to produce aggregated statistics and development of technical standards.