The European Parliament has today announced plans for a new Regulation that will enable EU countries to increase the level of crowdfunding rounds without the need for a prospectus from €5m to €8m.
This is fantastic news for ambitious businesses across the EU. Nearly 50 businesses have already raised in excess of £1 million on Crowdcube and its partner Global Asset Finance Limited, with many, including goHenry which raised £4 million earlier on this year, being limited by the existing EU regulations.
The new EU rules, which we have lobbied for, will pave the way for much larger crowdfunding rounds for a new wave of growth-stage businesses and is the latest sign that crowdfunding is now recognised as a vital and mainstream source of funding.
Under the current EU Prospectus rules, businesses, including those in the UK, are limited to raising €5m without the need for a prospectus. However, once the new Regulation takes effect businesses will be able to raise up to €8m without the need to produce a prospectus.
Back in April this year we wrote about the work that Crowdcube has been doing in Brussels to help Policymakers understand the need to increase the exemptions in the Prospectus rules to increase access to capital for SMEs all over Europe.
We welcome the news that EU policymakers are continuing to support the growing crowdfunding sector. In the UK, the FCA has set the benchmark for effective crowdfunding regulation that enables access to finance while requiring regulated platforms like Crowdcube to protect investors. The new EU Regulation means that other countries around Europe will further open up their crowdfunding markets, while more established markets and platforms will be able to expand and remain global leaders.
Paul Massey, Crowdcube’s General Counsel, played a key role in the European Crowdfunding Network’s and UK Crowdfunding Association’s work in Brussels on the new Prospectus Regulation. He commented:
“The announcement from Brussels on the forthcoming Prospectus Regulation is a massive step forward for investment crowdfunding across Europe. Increasing the lower prospectus exemption threshold to €1m will help to harmonise crowdfunding across Europe and open new markets. The rules will take time to come into effect, but increasing the upper threshold to €8m should enable established platforms like Crowdcube to continue to be global market leaders in equity crowdfunding, by allowing larger fundraises.
We will continue to work with policymakers on the finer detail of the new rules. Crowdcube is a pan-European platform and whatever the outcome of the Brexit negotiations, EU laws will continue to influence or define our sector for the foreseeable future.”
Crowdcube raised £7.7 million this year and issued its own Prospectus. We therefore understand the requirements for larger crowdfunding fundraises. The new EU Regulation also proposes a simplified ‘Growth Prospectus’ for lower cap companies and fundraises below €20m, providing further scope for larger fundraising rounds via crowdfunding.
You can read the full announcement from the European Parliament here.