Crowdfunding service provider licence
A crowdfunding service provider is a legal entity established in the European Union that provides crowdfunding services consisting of matching the interests of investors and project owners to finance a business using a crowdfunding platform that includes any of the following activities:
- enabling lending (credit crowdfunding);
- the placement of transferable (investment) securities and instruments accepted for the purposes of crowdfunding issued by project owners without a firm commitment and the receipt and transmission of client orders in respect of such securities and instruments (investment crowdfunding).
Regulation 2020/1503 of the European Parliament and of the Council of on European providers of corporate crowdfunding services sets out the conditions for the activities of a crowdfunding service provider.
Exceptions to the Regulation
The Regulation does not apply to:
- group financing services provided to project owners who are consumers;
- other services related to crowdfunding services provided in accordance with national law;
- crowdfunding offers with a consideration exceeding EUR 5,000,000 (calculated over a twelve-month period).
Licenses for providers of group financing services are granted by the Czech National Bank (CNB).
Article 12 of the Regulation lays down the requirements for an application for a license to operate as a provider of group financing services. The basic requirements include:
- a programme of activities defining the types of crowdfunding services the applicant intends to provide and the crowdfunding platform it intends to operate;
- a description of the governance, management systems and internal control mechanisms;
- a description of the systems, resources and procedures for the control and protection of data processing systems;
- a description of operational risks and prudential safeguards;
- information on the identity of the natural persons in a managerial position of the provider, their integrity, good repute, sufficient knowledge and professional skills to manage the provider;
- information on controlling persons up to beneficial owners.
The preparation of the application and all attachments is a demanding process that can take several months. Within 25 working days of receipt, the CNB will review the application for a group finance provider license for completeness and, if necessary, invite the applicant to complete it. The CNB then has 3 months to decide whether to grant or refuse the license. However, in view of the extremely short timeframe for the decision, it can be expected that licensing procedures will be interrupted, and applicants will be invited to amend their licensing documentation in the context of the CNB’s comments without the 3-month timeframe running.
There is a transitional period until during which existing providers of group financing services may continue to operate as they did on under the existing conditions. Thereafter, only CNB license holders will be able to provide group financing services under the Regulation.
In consideration of the length and complexity of the whole process of obtaining a CNB license for group financing services, we recommend that clients start dealing with the situation as soon as possible.
If you are interested in our services, please contact us at email@example.com or +420 222 767 393 to arrange an initial consultation.