For some time now, investors all over the world have been showing great interest in innovative business ideas, particularly those related to the computer industry and/or technological sector. As a matter of fact, as far as Peru is concerned, people have been betting on startups through the so-called Business Angels, wealthy investors trying to find a profitable medium or long-term investment in innovative businesses. In addition, the State has created programs like INNOVATE PERU to fund innovative ventures, among other things.
In the current context, the financial needs of new ventures resulted in the design of a wide range of alternative financing mechanisms like crowdfunding, which has become quite fashionable in recent years.
Crowdfunding is the practice of having a business idea collectively funded by raising small monetary contributions from a large number of investors, securing the delivery of the final product once the innovative idea is put into practice. As mentioned earlier, this system was developed as an alternative to the traditional business funding method, as it is difficult for high-risk innovative ideas to access bank funding.
It is worth pointing out that crowdfunding can also be achieved by presenting business ideas online, where potential investors analyze the investment proposal and contribute money to the project if they like the idea, also online. The investment proposal should usually raise the required venture capital within a specific period of time.
Crowdfunding currently offers different options, as it makes it possible to pre-sell a product (this is the most popular option), receive donations (without any return on the investment), make loans (the investor takes a refund of contributions paid into the venture plus interest), and engage in equity crowdfunding (which allows the investor to become a project partner) and real estate crowdfunding (which allows the investor to become the co-owner of property).
Current regulations
During the last few years, laws have been enacted in many countries to regulate crowdfunding, particularly equity crowdfunding, to the extent it works as a public offering and transfer of securities. In 2013, it was regulated in Italy by Consob Regulation N.18592; also in 2013, it was regulated in the United States through the issuance of the Jumpstart Our Business Startups Act, known as Jobs Act; and in 2014, it was regulated in the United Kingdom by Policy Statement 14/4. Moreover, several other bills have been drafted in other European countries to regulate crowdfunding.
In Peru, there is no single legal document which regulates crowdfunding, nor are we informed of the filing of any bill with Congress. Notwithstanding, we need to comply with the requirements set forth in legal rules which are of general application, like the Civil Code, the Tax Code, special Income Tax Laws, the Value Added Tax Law, the Stock Exchange Law, among other legal rules.
We would also like to point out that Article 3 of the Stock Exchange Law (approved by Legislative Decree Nº 861) provides that “securities” refers to freely negotiable securities which are issued on a massive scale and confer on their holders credit, ownership or equity rights or a participating interest in the capital, equity or profits of the issuer. Similarly, Article 4 thereof provides that a public offering is deemed to have been made when securities are offered to the general public or to specific segments of the general public to carry out any legal act related to the placement, purchase or disposal of securities. Accordingly, we believe that equity crowdfunding will have to be supervised by the Stock Exchange Superintendency (SMV) because it falls within the aforementioned assumptions.
Moreover, it should be pointed out that SMV has issued a public communiqué on crowdfunding, warning the general public about the existence of platforms which are advertising or offering financial assets or placing or selling securities through public offerings, as this activity should be subject to the applicable legal regime and must be supervised by SMV.