The new legal framework
A new law governing the recognition and supervision of the crowdfunding and laying down various provisions in the field of finance has been adopted on 18 December 2016 (the “Law”). The Law, which will enter into force on 1 February 2017, will also activate several personal tax incentives granted for the alternative financing of SME’s (capital contributions and loans) via an alternative financing platform.
The Law sets a mandatory framework for crowdfunding platforms that usually procure alternative financing services in Belgium, namely “services consisting in, through internet websites or by other electronic means, the marketing of investment instruments issued by start-up issuers, by starter funds or by financing vehicles, in the context of an offer, whether public or private, without the procurement of an investment service, with the exception, where appropriate, of investment advisory or reception and transmission of orders”.
Approval required by the FSMA
Under the new rules, legal or natural persons providing such services will need to obtain a prior approval of the Belgian Financial Services and Market Authority (FSMA). Regulated companies such as UCITS will only need to notify the FSMA.
The approval’s conditions set by the Law can be summarised as follow:
- the platform must be organised in the form of a commercial company and have its central administration in Belgium;
- the directors of the platform must fulfill certain conditions of good standing and expertise in the performance of their duties;
- appropriate organisation of the platform is required in view of the volume, nature and complexity of its activities; and
- the platform has to hold professional liability insurance.
Specific rules (such as enhanced information and detailed accounting requirements) designed to safeguard the rights of the investors are provided for alternative financing platforms using financing vehicles.
The Law will also have an impact on foreign platforms providing alternative financial services on the Belgian market, notably when performing an active marketing of investments instruments with Belgian investors.
New exemption from the obligation to publish a prospectus
The Law also makes it easier to launch a crowdfunding campaign without the need for a prospectus. The conditions to benefit from this new exemption are the following:
- the total amount of the offering must not exceed EUR 300,000;
- each investor cannot subscribe for more than EUR 5,000 (previously EUR 1,000);
- a document containing information on the amount and nature of the instruments offered and the reasons and terms of the offering must be made available to investors (this document does not need to be approved by the FSMA);
- investment instruments must be marketed through a (pre-approved) alternative investment platform or other regulated entity; and
- all documents relating to the offering must indicate the total amount of the offering and the maximum investment per investor.
New tax incentives for investments through crowdfunding
The Law is expected to have a positive impact of the financing of SMEs and start-ups. This is particularly so because prior to the new Law, the tax incentives introduced by the law of 10 August 2015 (known as “tax shelter for SMEs”) were practically inapplicable. Two new tax incentives can now be obtained through an investment via a crowdfunding platform:
- A personal income tax credit (up to EUR 30,000 rising to EUR 45,000 if certain conditions are met) for investing in the capital of start-ups (article 145/26 of the Belgian Income Tax Code). This provision will now – as a consequence of the recognition by the FSMA of crowdfunding platforms and other starter-up funds – be applicable for many more investors. Until now, qualifying investments were only possible in a “direct way” and were therefore reserved to experienced investors.
- The tax exemption on interest resulting from loans up to EUR 9,965 (article 21,13° of the Belgian Income Tax Code), which now includes those granted by a natural person to start-ups via a crowdfunding platform.