Platform helping lenders to find businesses that need financing. Permit (license) issue time – 1 month. Equity capital – from EUR 40 000.
Crowdfunding is booming in Europe. Banks and other traditional lenders are not able to finance all the businesses because of the risk and other regulations. Crowdfunding platforms provide a marketplace for other lenders to fill the existing gap and finance existing and new businesses. Interest rate paid by the crowdfunding platforms to the lenders is usually higher than paid by traditional finance institutions.
Crowdfunding is ideal financing tool to finance start-ups, letting lenders to get the share in start-ups and expect high return. The new Lithuanian Law on Crowdfunding came into power recently, making Lithuania one of the few jurisdictions in Europe having modern, clear and transparent crowdfunding regulation. Securities issued by licensed crowdfunding platforms are tradable in all EEA/EU, making it possible to attract capital for crowdfunding needs from all around Europe.
The operator of crowdfunding platform must be domiciled either in the Republic of Lithuania or in the other EU member state.
When applying to the supervisory authority for inclusion in the public list of crowdfunding platform operators, the operator must submit information related to members and managers (heads) of the platform operator, information on prudential requirements of the platform, a plan in case ongoing concern and other documents.
The bank of Lithuania (regulator) makes a decision regarding inclusion in the list (licensing) within 30 business days.
The capital requirement for the operator amounts to EUR 40,000. However, own capital cannot be lower than the bigger of the following amounts: EUR 40,000 or the need of own capital, which must be at least 0.2% of the amount of outstanding funds financed through the crowdfunding platform and not repaid to investors.
Licensed crowdfunding platform operators are permitted to raise capital through crowdfunding platforms using one of four different instruments: (i) simple loan agreement; (ii) issue of debt securities (i.e. bonds); (iii) issue of equity securities (i.e. shares); or (iv) assignment of claim rights deriving from credit agreements already concluded. However, private limited liability companies will not be allowed to publicly offer their shares.
Additional requirements depending on values of transaction
No additional requirements are applicable to a financing transaction intended to raise an amount less than EUR 100 000 in 12 months.
The crowdfunding project owner willing to enter into financing transactions for the total amount ranging from EUR 100,000 up to EUR 5 million in 12 months must draft a memorandum disclosing the basic information about the project owner and the project, and submit it to the crowdfunding platform operator.
The project owner willing to enter into financing transactions for the total amount of EUR 5 million or more in 12 months can carry out the project only by issuing and registering securities and preparing securities issue prospectus.
Licensed crowdfunding platform operators are considered as financial advisory firms and do not require additional licensing. Financial advisory firm may provide investment advisory services for investors (i) execution-only services (i.e. reception and transmission of orders) and (ii) offer investment recommendations.
More about FinTech licensing – www.ecovis.lt/fintech
More about ECOVIS experience – http://ecovis.lt/fintech/why-lithuania/