Crowdfunding: Legislation in Spain

MLVelascoCrowdfunding is a financing model that is rapidly gaining momentum all over the world. It works by collecting monetary contributions from a large number of people through an internet platform, with the objective to finance a project or a venture.

The model works around an internet platform (in Spanish plataforma de financiación participativa, or “PFP”), enabling a project initiator who proposes an idea to gather a high quantity of small investors that will individually contribute to the idea with a small amount.

Crowdfunding platforms worldwide raised 16.2 billions USD in 2014 with a forecasted 34.4 billions USD in 2015.

As of now, we can separate crowdfunding platforms in five broad categories:

Reward Based Platforms.
Entrepreneurs wishing to launch a service or a product will offer the final product or other types of rewards to the investors. This is includes technology products, design product as well as services, software, games and creative projects like comics and movies. Notable platforms are https:// and

Equity based crowdfunding
. This model is similar to the previous one except that investors receive equity of the company in exchange of funding. A notable example is

Debt-based. In this case companies or individuals get finance by putting borrowers and lenders in contact with a set published of credit terms. An example is

Litigation. Here investors get a stake in claims that they can fund, receiving a return if the claim succeeds.

Charity. In this model investor helps a charitable cause and rarely
receive their investment back Crowdfunding platforms profit by receiving a small percentage of the total funded amounts.

Spanish law and crowdfunding
The Spanish government regulates crowdfunding with a new law 5/2015 of the 27 April. The context of application of this law is very specific and is applicable when the crowdfunding activity happens in Spain.

The activity is considered to have happened in Spain:
If the crowdfunding platform social headquarters are located in Spain.
If the platform is based in a foreign country, but actively recruits clients in Spain (through marketing activities)
If the services offered by the platform are specifically tailored for investors or initiators residing in Spain.

The law doesn’t apply if the investor or the initiator is a resident in Spain and participates in a crowdfunding activity on their own initiative in a foreign crowdfunding platform.

Regulations for platforms
Platforms based in Spain must follow specific requirements and authorisations by the Spanish National Securities Market Commission (share capital and minimum set of guarantees for investors).

Project initiators
The project owner must be based or incorporated in the EU and has not been disqualified by insolvency, convicted of crimes against social security and public treasury, company mismanagement or money laundering.

The maximum limit for funds raised for a single project is 2 Million Euros (or 5 Million Euros for funding aimed at professional investors). The platform must ensure that investors are completely informed about the project and the project owner.

Nevertheless, investors are responsible for the accuracy of the information provided.

Non professional investors cannot invest more than 3000€ per project or 10,000€ within a 12 months’ period from the same platform. Investors must be clearly informed about the possible risks if the project fails.

(News/Legal Advice)

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