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The China Securities Association has issued the “Administrative Measures for Private Equity Crowd Fu

Date:2020-05-11 17:17:53

On December 18, 2014 the China Securities Association issued the “Administrative Measures for Private Equity Crowd Funding (for Trial Implementation) (Draft for Comment)” (hereinafter:”Administrative Measures”). The main content of the Administrative Measures is as follow:

(1)    The nature of equity-based crowd-funding as that of a non-public offering;

(2)    The definition of the equity-based crowd funding platform and the scope of businesses eligible to use it;

(3)    The definition of eligible investors;

(4)    The responsibilities and duties of the entrepreneur;

(5)    Investor protection;

(6)    Rules for the self-discipline of the equity-based crowd funding industry;

(7)    Rules for equity based crowd funded businesses being run by securities companies.

The background of the Administrative Measures is that Premier LI Keqiang, at an executive meeting of the State Council, demanded the establishment of rapid financing facilities in the capital markets and the launch of a pilot program for equity-based crowd funding in order to foster small enterprises and lower financing costs. Those entities which are likely to use equity-based crowd funding can neither satisfy the CSRC requirements for an IPO nor bear the costs of obtaining CSRC approval. In order to avoid the need for approval, the China Securities association has opted for a system of private based funding.

The introduction of the Administrative Measures can clarify the legal status and scope of equity-based crowd funding business, protect the lawful rights of investors, and meet the investment needs of the general public and as such will allow for the proper self-discipline and healthy development of equity-based crowd funding industry.
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