Law 5/2015 of 27th April on the development of business financing, was published in the Spanish Official State Gazette (BOE) on 28th April 2015, and included amongst other items the legal framework applicable to participative financing, also known as crowdfunding platforms. This law is preceded by the draft bill commented upon in the articles “Draft bill for the promotion of corporate finance” by Mika Otomo and “Investment vehicle in Spain” by the author of this text.
These crowdfunding or participative financing platforms are entities which essentially put companies looking for financing for business projects into contact with investors who offer their funds in exchange for a monetary income. These platforms are different from an investment fund or a risk capital company, because they are open and thus anyone may act as an investor. Furthermore, the platforms do not receive money from the investors and may not offer investment packages for various projects; instead, they must establish communication channels between investors and business projects, without promoting any of them in particular.
WHO INVESTS AND WHO RECEIVES THE INVESTMENT AND HOW DOES THE MONEY ARRIVE?
In principle, anyone can invest via a crowdfunding platform. This said, there are limits to the investment and they depend upon the condition of the investor, and shall be dealt with in an article to be published shortly on investment via crowdfunding platforms.
On the receiver side, only certain business projects may be the object of investment. One of the fundamental tasks of the platforms is not only the reception, but also the selection of the projects to be financed. This topic shall also be the subject matter for a future article in this web.
HOW DOES A CROWDFUNDING PLATFORM COME ABOUT?
The new legal framework further states the requisites to be fulfilled by companies in order for them to be converted into a crowdfunding platform. There are many such requisites, which are, on occasions, complex. As an example, it would be necessary to have the permission of the National Stock Market Commission, a company name and a specific corporate object, as well as capital of 60,000 Euro.
The incorporation of crowdfunding companies shall also be dealt with in a future article on this website.
CONCLUSION
The market does not cease to create new ways of financing and the pooling of resources. In this respect, legislation is needed in order to adapt to the new reality of the market. From now on, investors, promoters and platforms shall have to adhere to a new framework, which up until now had not been contemplated.
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22nd May 2015
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