New EU rules pave the way for larger crowd rounds

The European Parliament has given the go-ahead for new Regulation that will enable EU countries to increase the level of crowdfunding rounds without the need for a prospectus from €5m to €8m.

The news was enthusiastically welcomed by platforms as the increase in the limit is expected to be a significant catalyst for alternative finance industry growth as more companies will seek investment online and for much larger capital rounds.

Crowdcube’s Luke Lang said: “This is fantastic news for ambitious businesses across the EU. Nearly 50 businesses have already raised in excess of £1m on Crowdcube, with many, including goHenry which raised £4m earlier on this year, being limited by the existing EU regulations.”

“The new EU rules, which we have lobbied for, is the latest sign that crowdfunding is now recognised as a vital and mainstream source of funding.”

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.”

The Parliament also stated that prospectuses published when securities are offered to investors or admitted to trading should be simplified and made cheaper to help the businesses and especially SMEs to find diverse sources of capital across the EU.

Since SMEs usually need to raise lower amounts than other issuers do, the cost of drawing a full prospectus is disproportionately higher for these smaller companies.

An agreement was made to create a standardised and lighter EU Growth prospectus regime available for SMEs.

The full release can be found here.