The German Crowdfunding Association announced today that the German parliament has approved the implementation of the European Prospectus regulation and, at the suggestion of the federal government, has decided to raise the upper limit of the prospectus exemption for crowdfunding issuance from the current €2.5 million limit to €8 million per issuer per year.
“The Federal Government has used the full scope of the exemption granted by the European Union to strengthen companies’ access to capital – this will also increase the opportunities for equity crowdfunding platforms.”
With this new regulation, Germany beats other European countries to the punch, in particular France which is planning to make a similar change by year end.
“Germany is taking a leading position in Europe by easing companies’ access to crowdfunded capital,” said Ralph Pieper, board member of the association in charge of regulation.
However further regulatory limitations remain to be lifted.
At the hearing in the German Bundestag earlier in June, the Crowdfunding association has issued recommendations which have yet to be approved and implemented:
- The current individual investment limits of €1,000 per investment and €10,000 per investor per annum are too low. The government announced that these limits could be raised in the context of the evaluation of the crowdfunding law, the Kleinanlegerschutzgesetz, KASG, at the end of 2018. The Crowdfunding association welcomes this.
- The brokerage of securities is still subject to high regulatory requirements. The association proposed a standardized intermediary license for online trading. Unfortunately, this issue was not addressed.
- The Crowdfunding Association calls on the federal government to start a dialogue with the industry in order to make the prospectus-free securities practicable.
- The Crowdfunding Association had also argued that not only public limited companies, but also limited liability companies (GmbHs) be included in the scope of the crowdfunding regulation. A request in this sense was rejected. The Crowdfunding Association welcomes, however, that the political will to facilitate crowdfunding for young companies, which operate mainly as GmbHs, exists.
“It is especially important that the new crowdfunding exemptions apply to startups. The federal government must improve their conditions. The unequal treatment of corporations and limited liability companies does not strengthen SMEs and startups,” said Tamo Zwinge, board member responsible for regulation and expert in the hearing of the Finance Committee of the German Bundestag.
Since the crowdfunding regulation does not currently apply to GmbHs, they will not benefit from the new €8 million exemption limit and remain limited to prospect-free issuance of only €100,000.
“The federal government acted and took a first step in the right direction. However, further steps must be taken to ensure that companies benefit from the impetus provided by the European Union,” said Uli Fricke, vice president, and member of the board responsible for press and public relations.
Therese Torris, PhD, is a Senior Contributing Editor to Crowdfund Insider. She is an entrepreneur and consultant in eFinance and eCommerce based in Paris. She has covered crowdfunding and P2P lending since the early days when Zopa was created in the United Kingdom. She was a director of research and consulting at Gartner Group Europe, Senior VP at Forrester Research and Content VP at Twenga. She publishes a French personal finance blog, Le Blog Finance Pratique.