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Crowdfunding

Crowdfunding entails the assembly of supply and demand of funding via, normally, an Internet platform. In the current financial market conditions, alternative manners of funding are desirable. Crowdfunding enables demanding parties, both legal entities (such as small and medium enterprises and start-ups) and private persons, to receive required funding from other parties than the regular players on the market, such as lending financial institutions.

Crowdfunding can be structured in numerous ways. The manner in which it is structured highly determines the regulatory rules applicable to crowdfunding pursuant to Dutch law.

Each of the parties involved in crowdfunding may be confronted with regulatory prohibitory and mandatory provisions: the investors, the recipient and the platform.

For example, investors may be confronted with the prohibition to offer credit to consumers if (i) the recipient qualifies as an consumer under Dutch law and (ii) the investors act in the course of their profession or their business.

The recipient may, for example, be confronted with the prohibition to attract, receive and have the disposal of redeemable funds if it acts in the course of its profession or its business. Redeemable funds are funds that are to be repaid at a certain moment in time and which nominal amount is fixed beforehand. Credit qualifies as redeemable funds. But also notes, bonds or other debt securities do. As an other example, the recipient may also be confronted with the obligation to publish a prospectus if it offers securities to the public in the Netherlands in exchange for the funds to be received from the investors, unless an exception or exemption applies.

Lastly, again solely as one of the (many) examples that can be given, the platform may be confronted with the requirement to obtain a license as a financial services provider for, for instance, providing advice to or acting as an intermediary for consumers in respect of certain financial products, such as credit or investment products. Also, the platform may be prohibited from acting as an intermediary in respect of attracting or receiving redeemable funds. Alternatively, the platform may be confronted with the obligation to obtain a license as an investment institution if it, for instance, advices, acts as broker, acts as underwriter or operates a trading platform in respect of the financial instruments, such as equity and debt securities.

We emphasize that the regulatory regime is highly dependent on the manner in which crowdfunding is structured.

Eversheds Sutherland is pre-eminently fit to assist you in structuring your crowdfunding ideas in a legally accurate manner contributing to a trustworthy and a high quality crowdfunding platform.

We endorse creative, high quality and pragmatic advice and an on-the-ball mentality with a view to the commercial side of the transaction. And all of that against competitive fees.

We refer you to our newsletter ‘The “10 Commandments” of crowdfunding’.

Miriam Ee, van