Avanti Uday Balapure, BCOM, LLB, LLM, DES’s Shri Navalmal Firodiya Law College, Pune (SPPU)
ABSTRACT
Crowdfunding as a concept has been in the limelight for quite some time now. Small businesses are constantly searching for reliable sources of funding. The first online crowdfunding platform was launched back in 2001 and users began to create crowdfunding projects since 2003. In June 2014, the Securities Exchange Board of India released a consultation paper on crowdfunding in India to provide a brief overview of crowdfunding. SEBI asked for suggestions and public comments till July 2014 after which it came out with draft regulations. Crowdfunding platforms essentially allow almost anybody to raise funds for any cause, ideas or business ventures. Crowdfunding is an innovative strategy for financing a new business venture form general public instead of seeking funds in traditional ways such as issuing bonds or bank lending. The most significant issue which arises is whether crowdfunding amounts to public offer or private placement. Another issue is regarding the regulation of an online trading platform in terms of internet security & risk awareness. Indian authorities have now started taking suo-moto actions against the companies raising funds through crowdfunding platforms, the business should carefully evaluate the terms as well as the overall model adopted by such platforms so that they do not end up committing any unintended contravention of the legal provisions. An offer can be made through a web based recognized and registered crowdfunding platform only to registered investors who have been given access to the platform. The researcher aims to throw light on whether websites shall require registration as an intermediary, possible registration procedures and also to analyse the guidelines regulated by SEBI and Companies Act, 2013 for the crowdfunding platform in India.
Keywords: Consultation paper, Investors, Public offer, Registration, Websites.
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