Equity crowdfunding

How it works

The term crowdfunding refers to the process by which a number of people (crowd ) contribute sums of money (funding), even small sums, to finance a business project or other initiatives using websites ("platforms" or "portals") and sometimes receive a reward in return.

The term "equity-based crowdfunding" refers to the purchase of an equity interest in a company through an online investment: in this case, the "reward" for the financing is represented by the set of patrimonial and administrative rights deriving from the participation in the company.

How is the phenomenon regulated in Italy? The "Decreto crescita bis" and the CONSOB Regulation.

In most of the countries where crowdfunding portals operate, the phenomenon is not subject to regulation and is therefore made to fall within the scope of existing disciplines (appeal to public savings, payment services, etc.).

Italy is, however, the first country in Europe to have a specific and organic regulation on equity crowdfunding only.

It is well known that the Italian productive fabric is based on small enterprises. It is also well known how difficult it is for these companies to obtain financing from banks, especially after the 2008 crisis. Even greater difficulties are encountered by newly established companies, better known as start-ups.

A particular type of start-up (innovative start-ups) is the subject of a number of regulations introduced by  Decree-Law No. 179/2012 (converted into Law No. 221 of 17 December 2012) on "Further urgent measures for the growth of the country" (also known as the "Growth Decree"). (also known as the "Growth Decree bis"). The very title of the "Growth Decree bis" helps to understand it was adopted with the aim of providing a stimulus to the economic growth of our country. In the overall design of the legislator, equity crowdfunding is seen as a tool that can foster the development of innovative start-ups through rules and methods of financing capable of exploiting the potential of the internet.

The Decree delegated to Consob the task of regulating some specific aspects of the phenomenon with the aim of creating a reliable "environment" capable, that is, of creating confidence among investors. Consob adopted the new regulation on 26 June 2013.


Investing with equity crowdfunding

Investing using equity crowdfunding portals has a high potential for returns but an intrinsic and equally high level of risk: investors must, therefore, be aware of the risks associated with investing in equity crowdfunding, which may also involve the risk of losing the entire capital invested.

Register of managers of portals for the raising of venture capital by innovative start-ups >

The raising of capital through equity crowdfunding takes place through portals specifically authorised by Consob, which, after assessing the Manager's integrity and professionalism requirements as well as its organisational and technological structure, shall, if the Manager's application is accepted, issue a resolution to register it in the Register of Managers of Portals for the Raising of Venture Capital by Innovative Start-Ups.

The Register is managed by Consob and features:

  • una ordinary section in which the managers of portals that are authorised by Consob following the positive verification of the existence of the requisites required by the Tuf and by the Regulation adopted by Consob with resolution no. 18592 of 26 June 2013 are registered;
  • special section in which banks and investment firms authorised to provide the relevant investment services that have notified Consob, prior to the start of operations, that they are carrying out the activity of managing an online capital raising portal are listed.

Who can raise capital on online portals

A person who raises capital through online portals authorised and registered in the registers managed by Consob is referred to as an 'Offeror'. An Offeror, i.e. raising capital through equity crowdfunding, may be one of the following entities:

  • small and medium-sized enterprises (SMEs), as defined in Article 2(1)(f), first introductory sentence, of Regulation (EU) No. 2017/1129 of 14 June 2017, organised in corporate form under the law of a Member State of the European Union or party to the agreements on the European Economic Area;
  • the innovative start-ups, including start-ups with a social vocation, which comply with the size limits provided for the definition of SME;
  • innovative small and medium-sized enterprises ("innovative SME");
  • corporations investing primarily in small and medium-sized enterprises; 
  • an undertaking for collective investment ("UCITS") that invests predominantly in small and medium-sized enterprises;
  • corporations investing primarily in small and medium-sized enterprises.

What the portal does and how equity crowdfunding works

The Portal acts as a showcase for the presentation of the Offeror's project, which through the internet presents itself to the audience of potential investors on the network. The institution of equity crowdfunding makes it possible to combine the contributions, even modest ones, of numerous small investors and to achieve a significant collection of money that can be used for the development of the entrepreneurial or investment project for which the Offer of financial instruments has been made on the portal.

The Portal has the primary and exclusive function of facilitating the widespread raising of risk capital by persons from the public who access it.

The provisions of the Consob Regulations establish the set of obligations and procedures to be followed by the interested parties (Investor/Offeror/Portal Manager) and which are necessary for the correct completion of the investment, in compliance with the system of protection provided by the Law in favour of the investor and the community of savers.

More information: http://www.consob.it/web/investor-education/crowdfunding