Crowd Control – a Move Towards the Regulation of Crowdfunding in Ireland
TECHNOLOGY, INNOVATION, LAW AND TAX
By Colm Manning and Emma Murphy
“Crowdfunding: obtaining small amounts of individual funding from a large number of different sources through online platforms that match lenders and investors with businesses or individuals seeking finance”
Crowdfunding is a growing phenomenon worldwide but remains an unregulated activity in Ireland and a relatively small industry when compared to other countries – crowdfunding represents approximately 0.33% - 0.4% of the SME finance market in Ireland; in the UK it represents 12% of the SME finance market.
However, because crowdfunding is a disruptive form of SME finance (particularly for companies operating in the Tech sector) that can be combined with or act as an alternative to more traditional forms of financing, there will likely be an increase in its attractiveness as financing option.
In 2017 The Department of Finance conducted a six week public consultation into the potential regulation of crowdfunding in Ireland. An upshot of this consultation is the Department’s “Feedback Paper on the Regulation of Crowdfunding in Ireland” which was published in January 2018.
The Feedback Paper’s key findings include:
The European Commission has also proposed a regime for regulation of crowdfunding which is due to be discussed in March 2018. Regulation on a European level could potentially open up the Irish crowdfunding market to other Member States thereby increasing competition.
As the Department of Finance has stated that it will closely monitor developments relating to crowdfunding and implement European regulations as necessary, it is fair to say that there is a new SME regulated financing option only a short distance over the horizon.
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