Crowdfunding as an alternative financing method: new changes bring more security for investors and make crowdfunding more attractive. Below is a brief overview of the most important changes.
The EU Regulation on European Crowdfunding Service Providers for Enterprises(ECSP Regulation ECSP Regulation) was adopted in October 2021 and has been in force since 10.11.2021. In Austria, the ECSP Regulation was made applicable by the Swarm Financing Enforcement Act at the end of December 2021 in addition to the amendments to the Capital Markets Act 2019(KMG 2019) and the Alternative Financing Act(AltFG).
What does ECSP stand for?
In short, it stands for “European Crowdfunding Service Provider”. In longer terms, it is an EU regulation that harmonizes the European crowdfunding market. ECSP is intended to bring the multitude of national regulations on crowdfunding to a legally uniform level and enable crowdfunding platforms across Europe to broker capital via securities and loans for the first time, which would provide issuers with better protection. Crowdfunding offers that fall within the scope of the ECSP Regulation are now excluded from the scope of the KMG 2019 and the AltFG.
The most important changes for crowdfunding platforms
- In future, various licenses will be required for platforms to broker investments within and outside of the ECSP Regulation. In Austria, crowdinvesting service providers require a license to offer their services under the ECSP, which must be applied for from the Financial Market Authority (FMA), which also monitors compliance with the requirements
- Crowdfunding platforms may now offer their investments throughout Europe, provided they have an ECSP license, and are no longer restricted to individual countries or their home market
- Financing may also be provided via (non-qualified subordinated) loans and transferable securities
The most important changes for issuers/companies
- Issuers may raise up to EUR 5 million across Europe in a 12-month period
- This may include several issues with different financial instruments
- Issuers must prepare a Key Investment Information Sheet of max. 6 A4 pages instead of a prospectus, in which the special features of loan-based and investment-based swarm financing must be addressed
The most important changes for investors
- Investors can now also invest in crowdfunding campaigns throughout Europe, including in the form of collateralized (non-qualified subordinated) loans and transferable securities;
- In future, a distinction will be made between “knowledgeable” and “non-knowledgeable” investors, with the latter being subject to higher requirements and hurdles that the crowdfunding platforms must query
Sources:
Wirtschaftsnachrichten 7-8/2022, Marie-Theres Ehrendorf, “EZU Regulation: What will change for Austria’s crowd investors
PwC Legal Austria, Mag. Irene Eckart, B.A./Dr. Michael Lind, LL.M, “New rules for crowdfunding – ECSP Regulation and Crowdfunding Enforcement Act”; https://blog.pwclegal.at/neue-regeln-fuer-crowdfunding-ecsp-vo-und-schwarmfinanzierung-vollzugsgesetz/
FMA, crowdfunding service provider; https://www.fma.gv.at/finanzdienstleister/crowdfunding-dienstleister/