Crowdfunding is emerging as one of the most efficient ways of gathering funding in Europe. To further accelerate this momentum, the European Union (EU) is offering new rules that will boost the crowdfunding industry and help it to expand, by updating the rules on the prospectus.
A prospectus is a legal document that companies issue to potential investors about their offering.
Also, the prospectus contains detailed information about the company's business, finances and shareholding structure.
The changes will help to facilitate access to financial markets for companies, particularly small and medium-sized enterprises (SMEs).
The prospectus directive needed to be revised to help businesses gain access to more diversified sources of funding. The proposed regulations will help simplify the rules and streamline administrative procedures, and make it cheaper and simpler for small businesses to access capital markets.
Among the changes to the prospectus regulation, we wish to highlight:
Raising the minimum: from €100,000 to €1 million
This means that unless you are raising more than €1 million, you will not need a prospectus. Member states can further exempt companies, up to €8 million, for their domestic markets.
Making the prospectus lighter and easier for small companies
For smaller companies that want to raise funds across Europe, there are now less complex requirements for issuing a prospectus. A new type of prospectus template, “the EU growth prospectus”, will be available for SMEs with less than 500 employees.
Shortening the prospectuses with better investor information
The information needed in a prospectus is shorter and more clear. Easier for investors and entrepreneurs!
A single database for all EU prospectuses
The European Securities and Markets Authority (ESMA) will, for the first time, provide free of charge and searchable online access to all approved prospectuses.
The regulations will head to the European Parliament to be approved, and after will be adapted. Stay tuned!
MyMicroInvest can help you raise funds, and guide you through the process of the legal and administrative aspects of the prospectus. We have experience in drafting prospectuses and European passporting. On our platform entrepreneurs can raise capital across Europe.
MyMicroInvest and the EU
MyMicroInvest is headquartered in Brussels, the heart of the EU. As such, we can closely monitor crowdfunding developments unfold at the European level.
The updated rules are a welcome change. Harmonising crowdfunding law, and unifying the prospectus rules will encourage more SMEs to raise capital. This will eventually accelerate the rotation of funds in the economy, boosting it and strengthening it further.