On 5 October 2020 the European Parliament approved new rules that facilitate crowdfunding platforms to provide their services in the EU single market. This new regulation can lead to the rise of the number of investors in start-ups, innovators and even in small companies.
Crowdfunding means an alternative source of funds (i.e. receiving money from multiple sources) mainly for start-ups and innovative companies that often face difficulties with the traditional credit institutions to receive credit or other funding for their objectives. Without a harmonised legislation it was nearly impossible for crowdfunding platforms to provide cross-border services, which was hindering investments and innovation.
The aim of the new regulation is the harmonisation of the existing different laws, hence crowdfunding platforms operating in more than one EU country can operate legitimately by respecting only one set of rules, i.e. the provisions of the new EU regulation. The regulation is applicable to service providers who raise at least EUR 5 million per project per year. The new provisions ensure the protection of the investors as well by obliging the crowdfunding service provider to give investors clear information (i.e. an information sheet prepared by the project owner) on each of the projects.
The new rules for European crowdfunding service providers will be applicable one year after the publication of the regulation in the Official Journal of the EU.