Indian Users

Information for Indian Users

Crowdfunding is solicitation of funds (small amount) from multiple investors through a web-based platform or social networking site for a specific project, business venture or social cause.

Crowd sourced funding is a means of raising money for a creative project (for instance, music, film, book publication), a benevolent or public-interest cause (for instance, a community based social or co-operative initiative) or a business venture, through small financial contributions from persons who may number in the hundreds or thousands. Those contributions are sought through an online crowd-funding platform, while the offer may also be promoted through social media

In Peer-to-Peer lending, an online platform matches lenders/investors with borrowers/issuers in order to provide unsecured loans and the interest rate is set by the platform. Some Peer-to-Peer platforms arrange loans between individuals, while other platforms pool funds which are then lent to small and medium-sized businesses.

7.0Indian Scenario

7.1. Existing Legal Framework

7.1.1 The provisions in the existing legal framework for raising funds by companies are regulated under Companies' Act 2013 and Securities Act i.e. SEBI Act, 1992, Securities Contracts (Regulation) Act, 1956, Depositories Act, 1996. Raising of pooled managed investment funds by various entities such as Alternative Investment Fund (AIF), Mutual Fund (MF) etc. is regulated under Securities Laws.

7.2. Public Issue of Securities by Companies

7.2.1 Companies making public issue of securities need to comply with public issue requirements prescribed in Companies Act, 2013 and Rules made thereunder, apart from the requirements of SEBI Regulations.

7.2.2 Companies Act requires a company proposing to make a public issue to make a listing application to recognized stock exchanges. It requires the issuing company to file a Prospectus with Registrar of Companies. Further, detailed disclosure requirements for Prospectus are also specified.

7.2.3 Under Section 24 of the Companies Act, 2013, the provisions relating to issue and transfer of securities by listed companies or those companies which intend to get their securities listed on any recognized stock exchange in India shall be administered by SEBI. Hence, SEBI regulates public issuance of securities and those private placements which are proposed to be listed on stock exchange(s).

7.2.4 SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2009 (ICDR) requires issuers making public issue of specified securities to comply with requirements prescribed there-in which includes appointment of merchant banker, registrar to issue, filing of draft offer document with SEBI, eligibility requirement such as track record, minimum promoter’s contribution, lock-in requirements, requirement to have a monitoring agency, etc., apart from detailed disclosure requirements.

7.2.5 However, in case of debt securities, there is a simpler regime and the issuer need to comply with SEBI (Issue and Listing of Debt Securities) Regulations, 2008 (ILDS), which requires compliance with basic requirements like having a Debenture trustee, Credit Rating, disclosure requirements, etc.

Further, once securities are listed in a Recognized Stock Exchange, the issuer has to comply with the continuous listing requirements.

7.3. Private Placements of Securities by Companies

7.3.1 Taking into account the recent misuse of private placement route by some companies which issued huge number of debt securities to public under the garb of private placements, Companies Act, 2013 and Rules made thereunder, have put some restrictions on private placements, which was previously lightly regulated.

7.3.2 As per Chapter III - The Companies (Prospectus and Allotment of Securities) Rules, 2014 , in case of a private placement of securities, private placement offer or invitation cannot be made to more than 200 persons in the aggregate in a financial year (excluding Qualified Institutional Buyers and employees of the company being offered securities under a scheme of employees stock option).

7.3.3 Such offer can be made only to such persons whose names are recorded by the company prior to the invitation to subscribe, and that such persons shall receive the offer by name, and that a complete record of such offers shall be kept by the company and complete information about such offer shall be filed with the Registrar within a period of thirty days of circulation of relevant private placement offer letter.

7.3.4 All monies payable towards subscription of securities through private placement shall be paid through cheque or demand draft or other banking channels but not by cash. Further, rules require that the payment to be made for subscription to securities shall be made from the bank account of the person subscribing to such securities and the company shall keep a record of all such bank accounts. The company shall allot its

securities within sixty days from the date of receipt of the application money for private placement, else money has to be repaid to the investors.

7.3.5 Company offering securities through private placement shall not release any public advertisements or utilize any media, marketing or distribution channels or agents to inform the public at large about such an offer.

7.3.6 Ministry of Corporate Affairs has also notified Companies (Prospectus and Allotment of Securities) Rules, 2014. As per the said Rules, a private placement offer letter shall be accompanied by an application form serially numbered and addressed specifically to the person to whom the offer is made and no person other than the person so addressed in the application form shall be allowed to apply through such application form. The value of such offer or invitation per person shall be with an investment size of not less than Rs.20,000 of face value of the securities.

7.3.7 A return of allotment of securities shall be filed with Registrar of Companies within 30 days of allotment along with a complete list of all security holders containing the full name, address, Permanent Account Number and E-mail ID of such security holder.

7.3.8 Companies Act, 2013 mentions that any offer or invitation that is not in compliance with the provisions of Section 42 shall be treated as a public offer and all provisions of Companies Act, 2013, and the Securities Contracts (Regulation) Act, 1956 and the Securities and Exchange Board of India Act, 1992 shall be required to be complied with, including the above mentioned requirements.

7.3.9 However, as mentioned above, Companies Act, 2013 provides a window for making private placement offers to Qualified Institutional Buyers (QIBs) and the 'limit of 200' is not applicable to such QIBs. QIBs are the entities such as a MF, Foreign Portfolio Investor (FPI), AIF, Scheduled Commercial Bank, IRDA registered Insurance company etc. as defined in SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2009.

7.4. Provisions regarding SME Funding

7.4.1 SEBI has taken various steps in the recent past to enable Start-ups and SME to raise funds through various routes such as SME Segment of Exchanges, Institutional Trading Platform (ITP), Category I- SME Fund under AIF Regulations. These channels are briefly defined in the following sections:

7.4.2 SME Segment

7.4.2.1 SEBI has specified framework for a SME segment (platform) on Recognized Stock Exchanges, where Small and Medium Enterprises (SME) can list their securities. A company which has its post-issue face value capital not exceeding ten crore rupees shall list only in SME platform. A company, which has its post issue face value capital more than ten crore rupees and upto twenty five crore rupees, has an option to list in SME platform. In case the post-issue face value capital exceeds Rupees twenty five crore rupees, the issuer should compulsorily list only on main board of the Stock Exchanges.

7.4.2.2 However, a listed issuer whose post-issue face value capital is less than twenty five crore rupees may migrate to SME platform if its shareholders approve such migration by passing a special resolution through postal ballot. An issuer listed on SME exchange proposing to issue further capital pursuant to which their post-issue face value capital may increase beyond Rs. 25 crore shall migrate to the main board, subject to obtaining in-principle approval of the main board before issue of such securities.

7.4.2.3 Various relaxations have been provided to SMEs listing on SME segment under SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2009. Some of them are:

• Draft Offer document may be filed directly with the exchange and not necessarily with SEBI.

• Eligibility criteria for an issuer under Regulation 26 is not applicable to companies listing under SME segment.

• Minimum application value of Rs.5000-7000 is not applicable (min. application value shall not be less than Rs. one lakh per application).

• Minimum number of prospective allottees is fifty (instead of 1,000 in Main board).

7.4.2.4 Similarly, relaxations have also been provided with respect to the continuous listing requirements for Companies listed in SMEs:

• Requirement to file half yearly financial results instead of quarterly

• Exemption from publishing financial results in newspaper

• SME companies may send abridged annual report to their shareholders. However, the same need to be displayed on the website of the exchange and company.

7.4.2.5 Apart from the above, there is a compulsory market making requirement for companies listed on SME segment for a minimum period of three years from the date of listing to ensure liquidity in the market.

7.4.2.6 SME Segments were launched on BSE and NSE on December 14, 2012 and September 18, 2012 respectively. There are 60 SMEs listed on the BSE SME Exchange and 5 SMEs listed on the NSE SME Exchange (Emerge) as on June 11, 2014.

7.4.3 Institutional Trading Platform (ITP)

7.4.3.1 SEBI has permitted listing of Small and Medium Enterprises (SME), including start-up companies, on the SME exchange Institutional Trading Platform (ITP), without being required to make an initial public offer. The main features of the ITP Platform following are:

• Only such SMEs which do not have their securities listed on any recognized stock exchange are permitted to list their specified securities exclusively on the ITP.

• The listing process of ITP does not involve an IPO, or private placement or any issue of securities.

7.4.2.3 Various relaxations have been provided to SMEs listing on SME segment under SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2009. Some of them are:

• Draft Offer document may be filed directly with the exchange and not necessarily with SEBI.

• Eligibility criteria for an issuer under Regulation 26 is not applicable to companies listing under SME segment.

• Minimum application value of Rs.5000-7000 is not applicable (min. application value shall not be less than Rs. one lakh per application).

• Minimum number of prospective allottees is fifty (instead of 1,000 in Main board).

7.4.2.4 Similarly, relaxations have also been provided with respect to the continuous listing requirements for Companies listed in SMEs:

• Requirement to file half yearly financial results instead of quarterly

• Exemption from publishing financial results in newspaper

• SME companies may send abridged annual report to their shareholders. However, the same need to be displayed on the website of the exchange and company.

7.4.2.5 Apart from the above, there is a compulsory market making requirement for companies listed on SME segment for a minimum period of three years from the date of listing to ensure liquidity in the market.

7.4.2.6 SME Segments were launched on BSE and NSE on December 14, 2012 and September 18, 2012 respectively. There are 60 SMEs listed on the BSE SME Exchange and 5 SMEs listed on the NSE SME Exchange (Emerge) as on June 11, 2014.

7.4.3 Institutional Trading Platform (ITP)

7.4.3.1 SEBI has permitted listing of Small and Medium Enterprises (SME), including start-up companies, on the SME exchange Institutional Trading Platform (ITP), without being required to make an initial public offer. The main features of the ITP Platform following are:

• Only such SMEs which do not have their securities listed on any recognized stock exchange are permitted to list their specified securities exclusively on the ITP.

• The listing process of ITP does not involve an IPO, or private placement or any issue of securities.

• While such companies are listed on the platform, they are not permitted to raise capital.

• Since the trading lot has been mandated as 10 lakh, participation in this platform is restricted to informed investors.

• The companies listed in ITP are SMEs and start-up companies which get visibility by listing in the stock exchanges, without any public issue of their securities.

• The regulatory framework for ITP also envisages that the SMEs listed in this platform will mandatorily exit the platform if (a) a period of 10 years have elapsed since the company was listed in the ITP (b) the paid-up capital of the company is more than twenty five crore rupees (c) the revenue of the company is more than three hundred crore rupees (d) company reaches market capitalization of more than five hundred crore rupees.

7.4.3.2 This platform is merely meant to provide the initial impetus for such SMEs rather than a sustained listing over a long term horizon.

7.4.3.3 In addition to the visibility to SMEs, this framework also provides a trading platform for the scrips of Start-up Companies held by Alternative Investment Funds (AIFs), VCFs etc. and enhances the liquidity in such scrips, which in-turn provide enabling environment for SME and start-up enterprises to flourish.

BSE launched its ITP on February 11, 2014. There are 6 companies listed on ITP of BSE. NSE launched its ITP on October 28, 2013 and there is 1 company listed on it as on June 11, 2014.

7.5. Provisions related to Alternative Investment Funds:

7.5.1 SEBI (Venture Capital Funds) Regulations (“VCF Regulations”) were framed in 1996 to encourage funding by entrepreneurs’ early-stage companies in India. However, since registration of VCF was not mandatory under VCF Regulations, all players in the alternative funds industry were not registered with SEBI. Hence, it was felt that there was a regulatory gap which needed to be addressed. Further, SEBI Board had

approved the proposal for a clear regulatory framework for privately pooled investment vehicles under AIF framework to inter-alia pave way for increased investment in start-ups, SMEs, etc. and also provide for a mechanism to monitor and assess systemic risks and risks to financial market stability posed by the activities of some funds such as Hedge funds.

7.5.2 Considering the same, SEBI notified the framework for registering and regulating Alternative Investment Funds (AIF) through SEBI (Alternative Investment Funds) Regulations, 2012 on May 21, 2012.

7.5.3 These Regulations cover all privately pooled investment vehicles in India raising funds from Indian or foreign investors for investing in accordance with a defined investment policy for the benefit of its investors. However, Mutual Funds, Collective Investment Schemes, Family Trusts, Employee Welfare trusts, Securitization trusts, any other funds regulated by other regulators, etc. are exempted from the ambit of the AIF Regulations.

7.5.4 These regulations seek to cover the funds broadly under 3 categories.

• Category I – which includes Venture Capital Funds, SME Funds, Social Venture Funds, Infrastructure Fund, etc. (which invests in sectors or areas which the government or regulators may consider as socially or economically desirable);

• Category II – which includes private equity funds or debt funds (which does not undertake leverage or borrowing other than to meet day-to-day operational requirements) and

• Category III – which includes Hedge Funds - (employ leverage including through investment in derivatives)

7.5.5 As per the said Regulations, AIF should be prohibited by its trust deed/memorandum and articles of association/partnership deed from making an invitation to the public to subscribe to its securities. AIF shall not accept from an investor an investment of value less than Rs. 1 Crore and no scheme of the AIF shall have more than 1,000 investors. Further, each scheme of the AIF shall have a minimum corpus of Rs. 20 crore. Further, the manager or sponsor shall have a continuing interest in the AIF of certain percentage of the corpus.

7.5.6 Category I AIFs are further categorized in 4 sub-categories: (i) Venture Capital Funds (ii) Social Venture Funds, (iii) SME Funds, (iv) Infrastructure Funds.

i. Social Venture Funds:

An AIF which invests primarily in securities or units of social ventures and which satisfies social performance norms laid down by the fund and whose investors may agree to receive restricted or muted returns may get itself registered as a Social Venture Fund under SEBI (Alternative Investment Funds) Regulations, 2012. It can accept investment which is not less than one crore and such investor may accept muted returns. Such funds are also entitled to accept grants, provided that utilization of such grants shall be restricted to social ventures. Further, the amount of grants that may be accepted by the fund from any person shall not be less than Rs. 25 Lakhs and no profits or gains shall accrue to the provider of such grants.

There are 3 Social Venture Funds registered with SEBI with a corpus of Rs. 820-900 Crores as on June 11, 2014.

ii. SME Funds:

An investment fund which invests primarily in unlisted securities of investee companies which are SMEs or securities of those SMEs which are listed or proposed to be listed on a SME exchange or SME segment of an exchange may get itself registered as an SME Fund. Such funds:

• shall invest at least 75% of the investible funds in unlisted securities or partnership interest of venture capital undertakings or investee companies which are SMEs or in companies listed or proposed to be listed on SME exchange or SME segment of an exchange

• may enter into an agreement with merchant banker to subscribe to the unsubscribed portion of the issue or to receive or deliver securities in the process of market making under Chapter XB of the Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2009

There are 5 SME funds registered with SEBI with corpus in the range of Rs. 1,625 -2,125 Crores as on June 11, 2014.

iii. Angel Funds:

Under SEBI (Alternative Investment Funds) Regulations, 2012, a sub-category has been created under Category I – Venture Capital Funds called “Angel Funds” vide amendment dated September 16, 2013. Such funds can raise funds from angel investors and make investments in start-ups/early stage companies.

In order to ensure that investment by such angel funds is genuine 'angel investment' in India, it is prescribed that the investee companies:

a. are incorporated in India and are not more than 3 years old; and

b. have a turnover not exceeding Rs 25 crore; and

c. are unlisted, and

d. are not promoted, sponsored or related to an Industrial Group whose group turnover is in excess of Rs. 300 crore, and

e. has no family connection with the investors proposing to invest in the company.

Investment in an investee company by an angel fund shall not be less than Rs. 50 lakhs and more than Rs. 5 crore. Such conditions are expected to ensure that the investments are genuine investments in start-ups/ early stage companies in India.

Minimum Corpus of an Angel Fund shall be Rs.10 Crores. Minimum investment from each investor shall be Rs. 25 Lakhs. As Angel investments are highly risky investments, necessary restrictions are imposed on the eligibility of the investors in order to ensure that only investors who have prior experience/ adequate awareness of such investments and who have sufficient capital invest in such funds. Reduced mandatory minimum sponsor/manager contribution is made applicable to Angel Funds comparing to other AIFs, i.e. 2.5% of the corpus/ Rs. 50 lakhs, whichever is lesser.There is 1 Angel Fund registered with SEBI as on June 11, 2014.

8.0 Is Crowdfunding really needed ?

8.1 As mentioned earlier, the 2008 financial crisis resulted in failure of number of Banks and, consequently, the new capital adequacy regulations for banks, such as Basel III were implemented. As a result, credit providers have become increasingly constrained in their ability to lend money to the real economy.

8.2 IOSCO Paper states that the amount of bank loans made in Western Europe and the USA dropped significantly at the beginning of the crisis. While there have been some signs of recovery in the US (although the growth rate is still below pre-crisis levels), in Western Europe the growth rate in loans to the non-financial corporate sector has been negative, especially to SMEs in the EU. In this funding vacuum, peer-to-peer lending and other Crowdfunding Platforms are growing in popularity, as bank liquidity is reduced and new regulatory requirements make obtaining loans for small and medium enterprises and individuals difficult.

8.3 In India, during the last few years, the IPO market has not been very active. Though, SEBI, has been at the forefront in facilitating fund raising by SMEs through measures like SME segment in Stock Exchanges, Category I- SME funds under AIF, Institutional Trading Platform, etc., still there is need to encourage innovative way of fund raising to provide an impetus to genuine SMEs/Start-ups and to explore other alternative models of fund raising with appropriate framework in consonance with retail investor protection.

8.4 Since the "Crowdfunding" phenomenon is gaining its popularity, its importance cannot be ignored. To regulate crowdfunding, it is very important to take note that while it is necessary to ensure that Start-ups/SMEs could raise funds at ease, it is equally important to ensure that no systemic risks are created wherein retail investors are lured by some unscrupulous players by substituting the existing framework, which has been developed over a period of time through experience and observation. Hence, there is

necessity to strike a proper balance between investor protection and the role equity markets can play in supporting economic development and growth.

8.5 While some regulators are criticized by media from “taking the crowd out of crowdfunding',8 there are also media reports explaining the risks in the model and stating that regulators who are today denounced for their intervention will then be castigated for their neglect.9

8.6 IOSCO Paper states that "A risk posed by moving to regulate a previously exempt sector is the perceived rubber stamping of the industry through regulation, creating credibility in the peer-to-peer lending and equity crowd-funding markets.

This could attract less experienced investors to these markets who may not understand the risks involved in these types of investment.

8.7 Therefore it would be appropriate for regulators to take appropriate stand in this regard and send out a message to the various stakeholders recognizing this emerging route of funding. India, so far, does not face a significant exposure to crowdfunding but given that this mode of fund raising is growing at a scorching pace, it is important that regulators keep an open eye and a vigilant attitude.

Question

Proposal for Crowdfunding in India

9.0.1 SEBI has provided various frameworks for raising of funds by startups, SMEs etc. as specified in the paragraph 7. In addition to the available frameworks, SEBI seeks to provide fresh avenues for startups and SMEs set up by young entrepreneurs and technology professionals to raise early stage funding through internet based platforms, potentially more efficiently and cost effectively than through public issue or private placement offering.

9.0.2 Crowdfunding is an innovative way to provide modest amount of funding to young entrepreneurs and technology professionals needing early stage or seed capital for startup companies which may spur entrepreneurship and ultimately assist in boosting the growth of real economy.

9.0.3 A company raising funds through online crowdfunding platforms or websites offers equity or debt interests in its business to investors who make small contributions, through a crowdfunding platform or social media. In most of the cases funding is sought online on the basis of future projections rather than a viable business model in operation which increases the risk of failures and therefore loss to the investors.

9.0.4 If the costs associated with regulatory provisions for investor protection are excessive, crowdfunding may not become a viable capital raising method. At the same time investors would be concerned about the risks of crowdfunding and may not be prepared to invest if there are no adequate safeguards in place. Therefore the proposal seeks to strike a balance between retail investor protection and capital market access to such ventures by providing adequate investor safeguard without creating too many entry barriers or significant regulatory burdens on the issuers.

9.0.5 Pure Donation Based Crowdfunding (where issuers directly seek donation from the grantors), Reward Based Crowdfunding (where issuers directly offers rewards like movie tickets, new computer game, download of a book etc.) and Peer-to-Peer lending do not fall within the regulatory purview of SEBI, as they do not generally involve

issuance of securities for financial return, and may require authorization from other regulators. For example, Peer-to-Peer lending may fall under the purview of RBI.

9.0.6 Taking into account various provisions under the Indian law and crowdfunding framework in other jurisdictions, this proposal seeks to explore the possibilities of having Security Based Crowdfunding framework in India within the existing legal framework.

9.0.7 Crowdfunding is intended to facilitate raising of modest amount by startups and SMEs for early stage funding and it is not necessary or appropriate to allow certain complex or hybrid products. Under the Security Based Crowdfunding, the possible routes which are being explored are as follows:

1. Equity based Crowdfunding (EbC)

2. Debt based Crowdfunding (DbC)

3. Fund based Crowdfunding (FbC)

9.0.8 In all the approaches, the Crowdfunding Platform plays a central role where investors can meet promising start up companies. The web based crowdfunding platform will facilitate raising of capital through its website from investors who have access to such platform. The first 2 routes are primarily based on the Private Placement route as defined under Section 42, Companies Act 2013. The FbC route is primarily modeled on SEBI (AIF) Regulations, 2012.

9.0.9 Before dealing with these routes it is important that the following are established:

• the investors that are allowed to invest through the crowdfunding platforms,

• the types of entities that are allowed to raise funds through this channel and the disclosure requirements,

• the types of entities that are allowed to set up internet based Crowdfunding Platforms to enable online solicitation from such investors,

and the different associated aspects.

9.1 Who can be the Investor?

9.1.1 Various jurisdictions have imposed different restrictions on investments and categories of investors who are allowed to invest in companies which are displayed on such internet based crowdfunding websites or platforms, such as:

9.1.2 It is necessary that the investors who seek to invest in crowdfunding understand the inherent risks involved in the speculative nature of start-up companies and illiquid nature of their securities and can bear the loss of the entire investment.

9.1.3 In Indian scenario, considering the necessity to provide alternative funding sources to Start-ups and at the same time to ensure that retail investors are not made to bear the risks of Start-up ventures, it is proposed to permit only Accredited Investors to participate in crowdfunding.

9.1.4 The Accredited Investors:

9.1.4.1 The proposed accredited investors who may be allowed to invest through crowdfunding platforms are as under:

• Qualified Institutional Buyers (QIBs) as defined in SEBI (Issue of Capital and Disclosure Requirements) regulations, 2009 as amended from time to time,

• Companies incorporated under the Companies Act of India, with a minimum net worth10

• High Net Worth Individuals (HNIs) with a minimum net worth Rs. 2 Crores or more (excluding the value of the primary residence or any loan secured on such property), and of Rs. 20 Crore,

• Eligible Retail Investors (ERIs):

o who receive investment advice from an Investment Adviser, or

o who avail services of a Portfolio manager, or

o who have passed an Appropriateness Test (may be conducted by an institution accredited by NISM or the crowdfunding platforms),

and

o who have a minimum annual gross income of Rs. 10 Lacs,

o who have filed Income Tax return for at least last 3 financial years,

o who certify that they will not invest more than Rs. 60,000 in an issue through crowdfunding platform,

o who certify that they will not invest more than 10% of their net worth through crowdfunding. (Net worth excludes the value of the primary residence or any loan secured on such property).

9.1.4.2 Thus those retail investors who have knowledge, experience or have access to investment advice and have resources to cope with the losses on their investments in a

10 Net Worth is calculated as the aggregate value of paid up equity capital plus free reserves (excluding reserves created out of revaluation) reduced by the aggregate value of accumulated losses and deferred expenditure not written off, including miscellaneous expenses not written off.

start up, are eligible to invest as ERI in crowdfunding and come within the category of accredited investors.

Question 2: Are the Accredited Investors mentioned in paragraph 9.1.4 suitable to participate in the risky investments of crowdfunding? Is there a need to expand or reduce the categories of investors or expand or reduce safeguards? Specify along with the rationale.

9.1.5 Investment Limits:

9.1.5.1 Chapter III - The Companies (Prospectus and Allotment of Securities) Rules, 2014 specifies that in case of a private placement of securities the offer or invitation to subscribe shall not be made to more than 200 investors in a financial year. Any offer or invitation made to QIBs or to employees of the company under a scheme of employees stock option shall not be considered while calculating the limit of 200 persons.

Therefore, EbC and DbC shall allow private placement offers through internet based crowdfunding platforms to any number of QIBs and a maximum of 200 HNIs and ERIs combined.

9.1.5.2 In some jurisdictions, e.g.in Italy professional investors must own at least 5% of the equity in a crowdfunded venture. The apparent intention is to give some form of comfort to retail investors that the issuer is genuine as one or more sophisticated investors have chosen to invest. It is therefore proposed that QIBs, Companies and HNIs should be required to own at least a certain percentage in every issue through EbC and DbC.

9.1.5.3 Chapter III - The Companies (Prospectus and Allotment of Securities) Rules, 2014 specifies that in case of a private placement of securities, the minimum offer value per person must be at least Rs. 20,000 of the face value of the securities. In