Procedure for offering through a Crowdfunding Platform
There is restriction on public offering other than a prospectus based offer and mandatory listing except for private placement of securities. Therefore it has been proposed that the offer can be made through a web based recognized crowdfunding platform only to accredited investors who have been given access to the platform.
A step-wise illustrative procedure
An issuer, satisfying the requirements as specified in paragraph and interested in raising funds, gets displayed on a recognized crowdfunding platform by submitting requisite documents and undergoing due diligence and screening by the platform.
• The crowdfunding platform also maintains a list of accredited investors who have been given access to the platform to invest in the companies displayed on it. The accredited investors are allowed to register only after examination of KYC compliances and fulfillment of other requirements like net worth, appropriateness test, signing of Risk Acknowledgement etc. as mentioned in paragraph
Post registration, these accredited investors are given a Login ID and password to access the platform.
• Post screening by the Screening Committee of the crowdfunding platform, the companies interested in raising funds through the platform can put up a notice containing the brief of their business plan on the platform along with the funds required.
• This notice will be subjected to an open discussion on a forum or public board, like a chat room or chat board, provided by the platform, amongst the interested accredited investors and the issuer in which the proposed business plan will be analyzed and critiqued from different perspectives. This feature is provided to gauge the interest of the accredited investors and support an informed decision making by the prospective investors
. • The notice is intended to draw the attention of accredited investors registered with the platform and not an invitation to subscription. After perusing the plan and discussing it, the interested accredited investors can make a commitment or pledge to the company about the funds they intend to invest.
• Once adequate demand is gauged, the issuer may make the formal offer for subscription to those who have made commitment, not numbering more than 200 HNIs, ERIs and Companies collectively, and any number of QIBs, with the detailed online Private Placement Offer Letter, which inter alia may contain the disclosures mentioned in paragraph 9.7.
This shall amount to an invitation or offer for subscription and shall be in compliance with the Section 42 of the Page 58 of 66 Companies Act, 2013 and other rules and regulations pertaining to private placement of securities.
• Pursuant to perusing the Private Placement Offer Letter, the accredited investors may choose to invest in the company or may decide to withdraw their commitment.
• The subscription amount shall be collected from the accredited investors who choose to invest pursuant to perusal of Private Placement Offer Letter of the issuer and kept in a separate bank account. The crowdfund platform owner or a reputed designated third party shall open an escrow account with a Scheduled Commercial Bank to hold the subscription funds of the investors.
• The issue shall remain open for a maximum period of 15 days.
• The crowdfunding issue will be considered successful only if it is able to achieve a minimum pre-specified threshold, expressed in terms of percentage of original issue size as mentioned in the Private Placement Offer Letter. This threshold shall never fall below 50%. The subscription amount shall be transferred to the issuer by the platform owner or the designated third party, only if the threshold is achieved
• The issuer shall allot the securities to the accredited investors who have subscribed to the issue within 15 days from the date of receipt of the subscription money. In case it fails to do so, it shall refund the entire sum to the subscribers within 15 days from the date of completion of 15 days. In case the issuer fails to refund the money within the aforesaid period, it shall be liable to refund that money with interest at the rate of 12% per annum from the expiry of fifteenth day of securities allotment.
• The issuer shall file a return with RoC as required under Companies Act 2013. .
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There is restriction on public offering other than a prospectus based offer and mandatory listing except for private placement of securities. Therefore it has been proposed that the offer can be made through a web based recognized crowdfunding platform only to accredited investors who have been given access to the platform.
A step-wise illustrative procedure
An issuer, satisfying the requirements as specified in paragraph and interested in raising funds, gets displayed on a recognized crowdfunding platform by submitting requisite documents and undergoing due diligence and screening by the platform.
• The crowdfunding platform also maintains a list of accredited investors who have been given access to the platform to invest in the companies displayed on it. The accredited investors are allowed to register only after examination of KYC compliances and fulfillment of other requirements like net worth, appropriateness test, signing of Risk Acknowledgement etc. as mentioned in paragraph
Post registration, these accredited investors are given a Login ID and password to access the platform.
• Post screening by the Screening Committee of the crowdfunding platform, the companies interested in raising funds through the platform can put up a notice containing the brief of their business plan on the platform along with the funds required.
• This notice will be subjected to an open discussion on a forum or public board, like a chat room or chat board, provided by the platform, amongst the interested accredited investors and the issuer in which the proposed business plan will be analyzed and critiqued from different perspectives. This feature is provided to gauge the interest of the accredited investors and support an informed decision making by the prospective investors
. • The notice is intended to draw the attention of accredited investors registered with the platform and not an invitation to subscription. After perusing the plan and discussing it, the interested accredited investors can make a commitment or pledge to the company about the funds they intend to invest.
• Once adequate demand is gauged, the issuer may make the formal offer for subscription to those who have made commitment, not numbering more than 200 HNIs, ERIs and Companies collectively, and any number of QIBs, with the detailed online Private Placement Offer Letter, which inter alia may contain the disclosures mentioned in paragraph 9.7.
This shall amount to an invitation or offer for subscription and shall be in compliance with the Section 42 of the Page 58 of 66 Companies Act, 2013 and other rules and regulations pertaining to private placement of securities.
• Pursuant to perusing the Private Placement Offer Letter, the accredited investors may choose to invest in the company or may decide to withdraw their commitment.
• The subscription amount shall be collected from the accredited investors who choose to invest pursuant to perusal of Private Placement Offer Letter of the issuer and kept in a separate bank account. The crowdfund platform owner or a reputed designated third party shall open an escrow account with a Scheduled Commercial Bank to hold the subscription funds of the investors.
• The issue shall remain open for a maximum period of 15 days.
• The crowdfunding issue will be considered successful only if it is able to achieve a minimum pre-specified threshold, expressed in terms of percentage of original issue size as mentioned in the Private Placement Offer Letter. This threshold shall never fall below 50%. The subscription amount shall be transferred to the issuer by the platform owner or the designated third party, only if the threshold is achieved
• The issuer shall allot the securities to the accredited investors who have subscribed to the issue within 15 days from the date of receipt of the subscription money. In case it fails to do so, it shall refund the entire sum to the subscribers within 15 days from the date of completion of 15 days. In case the issuer fails to refund the money within the aforesaid period, it shall be liable to refund that money with interest at the rate of 12% per annum from the expiry of fifteenth day of securities allotment.
• The issuer shall file a return with RoC as required under Companies Act 2013. .
CSGAURAV +919990694230
[email protected] https://www.facebook.com/gauravdelhiravpage
Subscribe to CS GAURAV SHARMA by Email
