The proposed structure for crowdfunding will provide an enabling framework. Crowdfunding may provide an alternative source of capital for entrepreneurs that either have limited access to capital or have exhausted other available sources of capital. This also saves the entrepreneur from a lot of effort required in obtaining capital and allows him/her to focus on the business.
One of the objectives of the regulations is to reduce the costs involved in raising funds for entrepreneurs. Under the existing regulations, an issuer is required to pay underwriter fees, legal and accounting fees, registrar and transfer agent fees, merchant banker fees, marketing & advertising fees or distribution commissions and other fees some of which may not be applicable in crowdfunding.
Crowdfunding facilitates such entrepreneurs in raising funds without incurring too much of the costs by doing away with the requirement of appointing a merchant banker, marketing & advertising expenses and book building etc. Further, there shall be no listing requirements and no prospectus needs be filed with SEBI. However, a company seeking display in recognized crowdfunding platform may be required to pay fees to such platform, which is expected to be substantially lower in comparison to the current issue expenditure. The fees to a platform may be dependent on various factors like number of platforms in the market, number of companies seeking display at such crowdfunding platforms etc.
Crowdfunding not only helps the issuers to raise money but also serves as a way of advertising for these companies. It helps in increasing their visibility which can directly or indirectly lead to the growth in their businesses. Crowdfunding is expected to spur entrepreneurship and benefit the entire economy.
Crowdfunding also enables investors to make relatively modest investments across a range of opportunities with relatively low transaction costs and obtain equity positions in companies that may eventually prove to be successful and profitable, which they are not able to do under the current regulations. Platforms may also charge a nominal fee to its registered accredited investors for carrying out their due diligence.
CSGAURAV +919990694230
[email protected] https://www.facebook.com/gauravdelhiravpage
Subscribe to CS GAURAV SHARMA by Email
