In recent years there has been an increasing interest in the phenomenon of innovative start-ups, newly established small and medium-sized enterprises. These companies, however, are limited by complicated situations on the market, such as the lack of initial capital, the difficulty in obtaining credit from banks and above all the complexity. This means that over time the first regulations are introduced, such as the Growth 2.0 decree in Italy and the Jobs Act in America, to provide innovative solutions to this type of problem. From here the phenomenon of crowdfunding takes shape.

The term crowdfunding refers to the process by which several people contribute sums of money of different amounts to finance a business project or initiatives of different kinds using Internet web - sites (platforms or portals ) and receiving compensation in return.

There are two types of crowdfunding: “equity crowdfunding” and “lending crowdfunding”, terms that stand for two different ways of investment.

Specifically, “equity crowdfunding” allows people to buy shares in a corporation, thus investing their own money in it. In return for their contribution, the investor expects to obtain a large increase in the value of their shares. On the other hand, “lending crowdfunding” allows someone to lend money to a company that will use it for its development plans, paying a predetermined return on someone loan. Those who make this type of investment are also referred to as “Crowdinvestitor”, because the investor expects to obtain a return on capital against the loan.

In Italy, the most used model is equity crowdfunding, and it was the first country in Europe to have adopted organic implementing legislation. A positive sign of the development of crowdfunding in Italy concerns the funds raised by active platforms for projects relating to different sectors, in fact according to a recent study it can be seen that from 2015 to today there has been an increase in funds raised which go from 50 to over 200 million euros.

In terms of regulation, it should be noted that on November 10, 2021, EU Regulation No. 2020/1503 on crowdfunding service providers for businesses entered into force. The enactment of this regulation entails an important impact for the European capital market because it gives all types of businesses, even the smallest ones, the opportunity to rely on a broader base of lenders, having at their disposal a market that transcends national borders. The European regulation includes equal provisions for all E.U. countries.

With regard to online capital raising, which is permitted up to 5 million euros, service providers are urged to be more professional, clear and transparent in order to protect investors from possible losses. Furthermore, it is expected that crowdfunding platforms will be able to obtain from the competent authority in their member state a European passport that allows them to operate in all member states in which they will apply to carry business.

From next November 11, the European regulation will become mandatory for all the Member States of the UE, until then the platform managers, present in the Member states, will be able to continue to provide crowdfunding services on the basis of national legislation.

On the national front, on 10 June 2023  Consob (the competent authority in the matter in Italy) issued the resolution no. 22720 on the subject of the "new Consob regulation on crowdfunding services", which abrogates the previous Consob regulation on the raising of capital through online portals adopted with Consob resolution no. 18592 of June 26, 2013.

The discipline pertains to:

• the process of authorization as a crowdfunding service provider and withdrawal of authorization;
• the disclosure obligations of crowdfunding service providers vis-à-vis Consob (the competent authority in the matter in Italy)   and supervisory authorities;
• marketing communications;
• the obligations of crowdfunding service providers.

 

In light of the foregoing, operators of crowdfunding services will have to comply with the E.U. regulation by November 2023, under penalty of administrative and financial penalties for anyone who provides crowdfunding services in the absence of the required authorization.

author: Dott. Federico Benedetti