Raising capital for a project through crowdfunding up to EUR 5 million is much easier since 21 July 2018 because no more prospectus has to be drawn up and approved by the Financial Services and Markets Authority (FSMA). Instead of a prospectus, only an information note must be drawn up.
In a previous article, we already reported that crowdfunding had been given a legal framework by the law of 18 December 2016.
That law introduced a prospectus exemption to facilitate the regulation of crowdfunding, provided that the following conditions were met:
- The maximum investment for the offer is EUR 5,000 per investor;
- The total value of the offer is less than EUR 300,000;
- All documents concerning the offer mention its total value and the maximum investment per investor.
The law of 11 July 2018 on investment instruments (also referred to as the "prospectus law") introduces now even more far-reaching exemptions.
1. Prospectus obligation is further liberalised
This new law applies, among other things, to securities offered through crowdfunding and introduces an additional prospectus exemption that applies from 21 July 2018.
As a result, the following rules apply to the crowdfunding platforms:
- No prospectus is required for offers of securities of EUR 500,000 or less, provided that the investor can subscribe for a maximum of EUR 5,000;
- A prospectus exemption applies to offers between EUR 500,000 and EUR 5 million. However, an "information note" must be drawn up.
- A prospectus must still be drafted for offers in excess of EUR 5 million.
The threshold above which the prospectus requirement applies is therefore increased from EUR 300,000 to EUR 5 million. These amounts are calculated over a period of 12 months.
As a result, people who set up a crowdfunding campaign have less administrative burdens. A prospectus must provide detailed information, must comply with certain strict legal requirements and must be approved by the FSMA.
2. An information note instead of a prospectus
An information note however is a concise document in which essential information about the offer
must be included. The law determines the minimum content of this information note.
This information note must provide pre-contractual information. Its content must be accurate, honest, clear and not misleading.
The information note must contain a brief description of the following elements:
- a description of the main risks inherent in the issuer and the investment instruments offered, which are specific to the offer or the relevant admission to trading;
- information about the issuer and the provider of the investment instruments, including the annual accounts of the issuer published over the last two financial years and information about the applicant for admission to trading;
- information about the conditions and the reasons for the offer or the admission to trading of investment instruments (their amount and nature);
- information about the characteristics of the investment instruments offered or to be admitted to trading.
At the top of the information note, the following statement should be included in a prominent place: "This document is not a prospectus and has not been audited or approved by the FSMA."
The information note must meet the following conditions:
- be written and presented in an easily analysable and comprehensible form ;
- in a concise manner of a maximum length of 15 A4 sides;
- and easy to read, thanks to the presentation, design and use of characters of readable size.
For organisers of crowdfunding campaigns, life is much simpler now that they no longer have to compile a prospectus under the amount of EUR 5 million, but are only obliged to draw up an information note.
With the equivalence of the thresholds regarding the prospectus requirement throughout the European Union, it becomes easier for crowdfunding platforms to operate across borders. They must always comply with local legislation.
It goes without saying that we will be happy to assist you in organising crowdfunding.