Legal Framework of Crowdfunding in Portugal: A brief overview
Abstract: This article provides a detailed overview of the legal framework of crowdfunding in Portugal, covering the permitted modalities, legal and regulatory requirements imposed on platforms and projects, as well as investor protection. The provisions of Law No. 102/2015 and references to the Portuguese Securities Market Commission (CMVM) will be highlighted.
Introduction to Crowdfunding:
Crowdfunding has become an increasingly popular practice in Portugal for raising funds through financial contr1.ibutions from a large number of individuals, often via online platforms. This form of collective financing encompasses various categories, such as donations, rewards, loans, and investments.
Modalities of Crowdfunding in Portugal:
The legal framework of crowdfunding in Portugal is established by Law No. 102/2015, which defines the permitted modalities in the country:
a) Donation-based Crowdfunding: In this modality, funds are collected as donations for specific projects or causes, without the expectation of financial return for the donors.
b) Reward-based Crowdfunding: Supporters contribute financially and receive non-financial rewards in return, such as products, services, or exclusive experiences related to the funded project.
c) Loan-based Crowdfunding: This modality involves the lending of money by investors to projects or companies, with the expectation of receiving the invested amount plus interest within a specified period.
d) Investment-based Crowdfunding: In this type of crowdfunding, investors acquire ownership stakes in companies or projects and have the potential to gain financial returns based on the performance of the venture.
Legal and Regulatory Requirements:
The legal framework of crowdfunding in Portugal imposes requirements and obligations on both crowdfunding platforms and projects or companies seeking funding. The main requirements include:
a) Registration with CMVM: Crowdfunding platforms must be registered with the Portuguese Securities Market Commission (CMVM), which is the regulatory authority responsible for overseeing and controlling crowdfunding activities in Portugal. Registration entails compliance with specific rules and obligations set forth by the CMVM.
b) Transparency and Information: Crowdfunding platforms must provide clear, accurate, and transparent information about the projects or companies seeking funding, as well as the associated risks. This includes disclosing information about the project’s objectives, the use of raised funds, investment risks, and refund policies.
c) Fundraising Limit: The legislation establishes limits for fundraising in each crowdfunding modality. For example, in investment-based crowdfunding, the maximum limit is €2.5 million. These limits aim to safeguard investor protection and prevent excessive concentration of resources in specific projects.
d) Investor Protection: The law seeks to protect investors participating in crowdfunding by establishing measures for safety and transparency. For instance, crowdfunding platforms must assess the suitability of the investment for each investor’s profile to ensure they have awareness and understanding of the associated risks. Additionally, under certain circumstances, investors may have the right to cancel their investment and receive a refund of the invested amount.
Benefits and Challenges of Crowdfunding:
Crowdfunding offers several benefits, such as access to financing for innovative or socially impactful projects, promotion of entrepreneurship, and community engagement. However, there are also challenges to consider, such as the need for investor protection against fraud and ensuring that crowdfunding platforms operate transparently and responsibly.
Final Considerations:
The legal framework of crowdfunding in Portugal establishes a set of rules and obligations that aim to balance the promotion of collective financing with investor protection. It is essential for platforms, project promoters, and investors to be aware of these regulations and comply with their legal obligations. It is recommended to consult the updated legislation and seek specialized legal advice for more detailed and up-to-date information on the subject.
Legal References:
- Law No. 102/2015 – Legal framework of crowdfunding in Portugal.
- Portuguese Securities Market Commission (CMVM) – www.cmvm.pt
