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CROWD – GET READY TO FUND!!! SEBI PROPOSES A NEW FRAMEWORK
- Following other developed economies, SEBI proposes to allow Indian startups / SMEs to raise capital from multiple investors through Crowdfunding.
- Such startups / SMEs will be approved by a ‘Screening Committee’ of the online Crowdfunding platform.
- Option to invest in such startups will be provided to eligible ‘Accredited Investors’ only.
- SEBI has currently issued a Consultative Paper for inviting comments and suggestions.
To promote the startup ecosystem in India, the Securities and Exchange Board of India (“SEBI”) has rolled out a ‘Consultation Paper on Crowdfunding in India’ (“Consultation Paper”) proposing a framework in the form of Crowdfunding to allow startups and SMEs to raise early stage capital in relatively small sums from a broad investor base. Crowdfunding, if introduced and regulated, will allow startups in raising capital in addition to the recently introduced Institutional Trading Platform (“ITP”). For more details on the ITP, please refer to our hotline here.
In this hotline, we analyze the proposed framework for Crowdfunding as provided in the Consultation Paper alongwith the funding opportunity that it provides. As the Consultation Paper also covers a global study on the subject, we will also analyze herein the framework of Crowdfunding, as it is prevalent in certain developed economies to better understand the proposed framework for India.