Bill on crowdfunding of business projects and aid to borrowers
The Sejm has passed the Act on crowdfunding of business projects and aid to borrowers (“Act”) (https://www.sejm.gov.pl/sejm9.nsf/PrzebiegProc.xsp?nr=2269).
The Act, currently awaiting the opinion of the Senate, adapts the Polish legislation to the EU regulations on crowdfunding.
Provisions governing crowdfunding in the Polish legislation
Regulations will be adopted to govern the activities of crowdfunding platforms which operate on the basis of a share model where the investor, in return for payment, takes up securities issued by the project owner, and to facilitate crowdfunding loans.
It is noteworthy that, at the moment, Poland has no regulations straightforwardly governing the crowdfunding. Crowdfunding platforms operate in Poland primarily according to the rules which are set out in the Public Offer Act. Based on this Act, project owners may advertise public offers using websites provided by crowdfunding platforms.
With the new solutions, small and medium-size enterprises can have an alternative access to funding. Limits will be increased for them, and they will be able to raise more capital e.g. for investments. The limit increase will be gradual.
The Act provides for an increase, starting from 10 November 2023, of the value threshold for a total consideration which exempts offers of securities to the public from the obligation to publish a prospectus from EUR 2.5 million to EUR 5 million. Public offers made outside the crowdfunding platform, which will bring the planned income in the range of EUR 2.5 million and 5 million, will be subject to the obligation to prepare an information memorandum. According to Regulation 2020/1503, owners of projects funded via crowdfunding platforms can get funds of up to EUR 5 million with no need to prepare a prospectus. For a period of 2 years from the effective date of the Regulation (i.e. until 9 November 2023) in countries where the threshold to exempt offers of securities to the public from the obligation to publish a prospectus is lower than EUR 5 million, crowdfunding offers can be made with no need to publish a prospectus only to the value which is not higher than the threshold provided for in the national law.
The explanatory memorandum indicates that currently a great majority of issuers who use the services of crowdfunding platforms make offers of up to EUR 1 million, which means that there is not need to publish information memoranda. Most offers end with the project owner getting just a fraction of the planned amount. Making the threshold for crowdfunding offers equal to that for offers which do not require a prospectus will thus lead to a 2.5 times increase of the funding threshold for business ventures by way of crowdfunding. Additionally, once Regulation 2020/1503 takes effect, an increase of interest in crowdfunding should be expected, both from project owners and investors. Reaching the general threshold for “no-prospect” offers of EUR 5 million should be correlated to increased interest in this form of funding, and thus to increased funds acquired through the crowdfunding platforms.
Additionally, pursuant to Regulation 2020/1503, the Act:
- identifies the Polish Financial Supervision Authority (Komisja Nadzoru Finansowego – KNF) as the authority competent to oversee the providers of crowdfunding services for business ventures. Moreover, the KNF is granted the supervisory rights (e.g. to suspend specific crowdfunding offers or the activity of providers and to cooperate with law enforcement authorities and supervisory authorities from other EU Member States),
- provides for relevant administrative and criminal sanctions for non-compliance with the regulation or the Act,
- provides for civil and criminal liability for the accuracy of information provided in the information documents prepared for crowdfunding offers,
- provides for professional secrecy and lays down the rules for retention of documentation relating to provision of crowdfunding services for business ventures.
The Act also implements the regulation whereby the obligation of publishing reports on the way orders are completed in the financial instrument trading system will be temporarily waived (until 28 February 2023).
Attention should be paid to the manner of protection of the personal data of crowdfunding service providers’ clients and entities which carry out the activities of crowdfunding for business. The elaborate regulations governing professional secrecy provide a definition of “professional secret” indicating that the secret includes information which identifies parties to the agreement, i.e. their personal data. Additionally, they strictly define the group of entities obliged to keep the secret, and situations where a professional secret can be disclosed to specifically identified entities and authorities.
The Act provides for the adequate level of safeguards in respect of retention of documentation relating to crowdfunding provider’s business. The obligation to retain the documentation using a durable medium guarantees that not changes will be made to the data and the data can be retrieved in an unchanged form. Additionally, the crowdfunding service provider can rely on a third party professional entity in this respect, which ensures data security.
The administrative sanctions to be applied by the KNF include the possibility to inform the public about the outcome of a decision/ruling, including (without limitation) the name and surname of the penalized party. The name and surname of the individual will be accessible at the KNF’s website for one year from the date of their disclosure, which is a standard practice in the financial market. Afterwards, even if the information regarding the decision remains posted on the KNF’s website, the information will be anonymized