Crowdfunding in Belgium: New law simplifies fundraising under Euros 5 million

Raising capital in Belgium through crowdfunding became much easier as of 21 July 2018 as applicants for projects of up to Euros 5 million can simply provide an information note instead of a prospectus (the previous requirement). A prospectus provides detailed information, must comply with certain strict legal requirements and must be approved by the Financial Services and Markets Authority (FSMA). However the requirements for an information note are considerably simpler.

A previous article by Peeters Law reported that a new law on 18 December 2016 gave crowdfunding a legal framework. That law introduced a prospectus exemption to facilitate the regulation of crowdfunding, provided that the following conditions were met:

• The maximum investment for the offer is Euros 5,000 per investor;
• The total value of the offer is less than Euros 300,000;
• All documents concerning the offer mention its total value and the maximum investment per investor.

This latest law of 11 July 2018 on investment instruments, also referred to as the "prospectus law", goes even further than its predecessor by introducing even more far-reaching exemptions.

Further prospectus exemptions introduced

This new law applies, among other things, to securities offered through crowdfunding and introduces an additional prospectus exemption that applies from 21 July 2018. The following rules now apply to crowdfunding platforms:

• No prospectus is required for offers of securities of Euros 500,000 or less, provided that the investor can subscribe for a maximum of Euros 5,000
• A prospectus exemption applies to offers between Euros 500,000 and Euros 5 million. However, an "information note" must be drawn up
• A prospectus must still be drafted for offers in excess of Euros 5 million.

The threshold above which the prospectus requirement applies has therefore increased from Euros 300,000 to Euros 5 million. These amounts are calculated over a period of 12 months.

As a result, crowdfunding has become more accessible: more people wanting to raise capital through crowdfunding can now do so without facing such extensive administrative burdens. 

How to put together an information note

An information note is a concise document which includes essential information about the offer being made and whose minimum requirements are stipulated by law.

An information note must provide pre-contractual information. Its content must be accurate, honest, clear and not misleading.

The information note must contain a brief description of the following elements:

1. A description of the main risks inherent in the issuer and the investment instruments offered, which are specific to the offer or the relevant admission to trading
2. Information about the issuer and the provider of the investment instruments, including the annual accounts of the issuer published over the last two financial years and information about the applicant for admission to trading
3. Information about the conditions and the reasons for the offer or the admission to trading of investment instruments (their amount and nature)
4. information about the characteristics of the investment instruments offered or to be admitted to trading.

At the top of the information note, the following statement should be included in a prominent place: "This document is not a prospectus and has not been audited or approved by the FSMA."

The information note must meet the following conditions:

1. Be written and presented in an easily analysable and comprehensible form
2. In a concise manner of a maximum length of 15 A4 sides
3. Easy to read thanks to the presentation, design and use of characters of readable size.

Conclusion

For organisers of crowdfunding campaigns, life is much simpler now that they no longer have to compile a prospectus for projects of less than Euros 5 million, but instead are only obliged to draw up an information note.

Moreover, it has become easier for crowdfunding platforms to operate across borders thanks to the European Union ensuring continuity across the board regarding the thresholds for prospectus exemptions. Although they must always comply with local legislation! 

For advice on crowdfunding in Belgium

Contact Brussels lawyer Leo Peeters at Peeters Law.