Participatory financing: another year for new approval

Since European Regulation 2020/1503 comes into force at the end of 2021, players in the crowdfunding industry have been subject to a new legal framework. Crowdfunding platforms must now obtain approval as a provider of participatory finance services. However, the one-year transition period has just been extended by a further 12 months by the European Commission.

Participatory finance service provider status

Participatory financing, or crowdfunding, enables individuals to respond to calls for funds from project owners via an online platform, in the form of a donation, investment or loan.

In November 2021, a new regulation (EU) 2020/1503 came into force, amending the rules governing crowdfunding. It gave rise to the status of Participatory Finance Service Provider (PSFP), which any crowdfunding platform must obtain in order to offer its services, by first filing an application for approval.

Whether corporate or individual, project sponsors are limited to a maximum of 5 million euros for each fundraising campaign. Funds can be raised in the form of loans or share subscriptions.

In addition to obtaining authorization, crowdfunding platforms must comply with a number of rules, particularly in terms of customer protection.

Transition period extended by one year

Initially, platforms were to benefit from a one-year transition period to obtain approval as a participatory finance service provider. This transition period, scheduled to end in November this year, has now been extended by a further year by the European Commission.

Crowdfunding platforms therefore have until November 2023 to apply to the Autorité des marchés financiers (AMF) for approval. The process involves several stages, starting with the presentation of the project and the submission of the application.

Once the application has been deemed complete by the AMF, the review period begins, and can last up to 3 months, until the final decision is made.

Online kitty funds are also covered by the new legal framework, which applies to any " predefined operation or set of predefined operations, an event or the support of a cause for which a project promoter is seeking total or partial funding ", as specified by the Autorité de contrôle prudentiel et de résolution (ACPR).