van Cutsem Wittamer Marnef & Partners​ LEADING GLOBAL NETWORK MACKRELL INTERNATIONAL IN CHAMBERS GUIDE AS FOR EIGHTH YEAR RUNNING.

Crowdfunding

Our firm assists clients in an alternative and innovative way of raising finance through the so-called crowdfunding. The process of crowdfunding is for the development of a product, business entity or the carrying out of an endeavour through a typically large group of individuals (“crowd”) and through a web platform (“crowdfunding platform”) which permits entrepreneurs to promote their projects to the public and collect relatively small amounts from that large number of contributors. The most common primer types of crowdfunding are:

  1. Donation-Based Crowdfunding (“DBC”); and

  2. Investment-Based Crowdfunding (“IBC”).​

Our Services

If you intend to raise and realise your projects in an alternative and innovative way through a crowdfunding platform, we offer the following services in an efficient and professional manner:

  1. Structuring, legal and regulatory advice on crowdfunding platform;

  2. Assisting with the entire licensing process for the applicable a Category 1A Licence for IBC;

  3. Reviewing and/or drafting of necessary documentation, especially the prospectus in case of IBC;

  4. Liaising with the competent Maltese authorities on an ongoing basis;

  5. Assisting with the company incorporation;

  6. Advising to ensure compliance with all the Anti-Money Laundering (AML) requirements and establishing effective KYC procedures for IBC; and

  7. Helping passport your licence to other European Union member states, thereby using Malta as a hub for providing services throughout the EU.

Investment based Crowdfunding

In case of this type of crowdfunding, the investors invest directly or indirectly in new or established entities by acquiring shares, bonds and other debt instruments (but not convertible shares), units in collective investment undertakings, and instruments embedding a derivative. In order to provide Investment-Based Crowdfunding services, a platform shall apply for a Category 1A Licence from the Malta Financial Services Authority.

The following restrictions shall also apply to the operation of this Investment-Based Crowdfunding platform:

  1. an investor cannot invest more than € 5,000 over a period of 12 months in any issuer listed on an Investment-Based Crowdfunding platform; and

  2. an investor cannot invest more than 20% of their net annual income through an Investment-Based Crowdfunding platform over a period of 12 months; and

  3. an offer of securities made on an Investment-Based Crowdfunding platform cannot exceed the value of € 1,000,000 over a period of 12 months; and

  4. an issuer shall only be allowed to place a project on one crowdfunding platform.

The Category 1A Licence is subject to minimum initial share capital of EUR 50,000, and a one-time application fee of EUR 2,500, but once the Investment-Based Crowdfunding is licenced in Malta, the platform can benefit from passporting their activities to other EU Member States in terms of the Markets in Financial Instruments Directive (2004/39/EC).

Donation based Crowdfunding

The Donation-Based Crowdfunding platforms are usually operating as a rewards-based system, where the investors or donors may support (especially donate) a project or a product by contributing relatively small amounts of money to the owner of the campaign which is advertised on the online Donation-Based Crowdfunding platform. Moreover, this platform allows to the idea, charity, or start-up business as part of the campaign to solicit funds in the form of donations, or exchange for specified rewards. As the Donation-Based Crowdfunding is basically not regulated as a financial service, our law firm provides assistance on company incorporation for Donation-Based Crowdfunding platform operating and in other platform operation legal requirements and advises on potential regulatory exemptions that may apply.

Key contacts

VIEW ALLVIEW ALL

RELATED NEWS

Sports Tokens in Malta

What are Sports Tokens? The ever-expanding world of cryptocurrency has recently taken its turn to enter into the popular and lucrative world of sport. News recently struck that a transfer of the highly renowned and talented football player Lionel Read more

What is Product Governance?

The notion behind product governance stems from the fact that investment firms which manufacture and distribute financial instruments known as products, shall act in the best interests of their investors at all stages of a product’s development Read more

Variation and Revocation of Trusts

The main difference between a variation and a revocation of a trust is that, whilst variation allows the power to revoke certain terms under a trust and introduce new ones, revocation allows the power to terminate the rights under a trust indefini Read more

The Beneficiaries in a Trust: Who is the Beneficiary?

There is no trust without a trustee. However, there is another essential party to the trust, without which the trust would be invalid: the beneficiary. The purpose behind creating a trust is to provide certain benefits to the beneficiary, that is, Read more

MiFID II suitability areas requiring improvement

The European Securities and Markets Authority (“ESMA”) published the results of the 2020 Common Supervisory Action (“CSA”) on MiFID II suitability requirements noting inter alia, that on the whole, firms do comply with the essential elemen Read more

The Duties of the Trustee

In analysing the duties of the trustee, it is fundamental to refer to article 21 of the Trusts and Trustees Act (Chapter 331 of the Laws of Malta) (the “TTA”) which lays down the fundamental duties of the trustee. Article 21(1) of the TTA refl Read more

A comparison between the MiCA Regualtion and the VFA Act

The scope of the Virtual Financial Assets Act, Chapter 590 of the Laws of Malta (“VFA Act”), is largely aligned with the Regulation of the European Parliament and of the Council on Markets in Crypto-Assets (“MiCA Regulation”), the latter a Read more

Updated Rulebook for Maltese Investment Firms

On the 5th August 2021, the Malta Financial Services Authority (“MFSA“) issued a Circular reminding relevant entities that the Investment Firms Regulation and Directive (the “IFRD Package“) came into force on the 26th June Read more