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Equity Crowdfunding Regulations

Equity crowdfunding involves the issuance of securities to backers of the company

What is Start-Up Crowdfunding:

Start-up crowdfunding is a process through which a business can raise small amounts of money from a large number of people using the internet. The objective is to raise sufficient funds in order to carry out a specific project. In Europe there is no limit to the amount of raise or the amount a backer can invest.

Equity Crowd Funding is also synonymous with Start-Up Crowdfunding. It’s a cost-effective way for new companies to raise funds, and an easy way for the investor to support a business and participate in potential future growth.

UK Crowdfunding Regulation is less restricted than the US

The UK regulations for crowdfunding is less restrictive than the US and has seen far greater growth over the past 5 years. The UK does not provide restrictions or a cap on the total amount any backer can invest in a company. There are no limits to the amount an issuer can raise in any given year.

Under the SEIS and EIS there are tax incentives for European small business investors eliminating the capital gains tax. US Investors pay the same capital gains taxes as for any other investment. (see your tax professional for specific details).

In the US, crowdfunding is currently restricted to $1,070,000 annually per company, which the SEC announce will be raised to $5M in 2021 See Here >. A backer can invest up to $2,000 or 5 percent of their annual income, whichever is greater if they make less than $100,000 per year. If a backer makes between $100,000 and $200,000 a year, the cap is up to 10% of their annual income.

The US requires additional requirements for companies by requiring an annual accounting audit if the raise of $500K.

The EIS and SEIS Tax Relief Programs for UK Taxpayers

The HMRC (Her Majesty’s Revenue and Customs) created two programs to stimulate growth of companies and start-ups. For qualifying early-stage and growth-targeted businesses.

EIS is the Enterprise Investment Scheme (EIS) created to stimulate investment in qualifying start-ups and early-stage companies. Investors receive up to 30% of their investment back in their taxes as relief. Investors can defer up to 50% of Capital Gains Tax. Loss relief can be used to apply against Capital Gains Tax or income tax.


The Seed Enterprise Investment Scheme (SEIS)

SEIS was created to provide new seed-stage company investing through income tax relief to individuals at a rate of 50% of the value of their investment, with a maximum amount of £100,000 in investments per tax year. There is also up to a 50% Capital Tax Gains Relief up to £50,000 on shares that are reinvested into EIS eligible shares. Also, any gains may be exempt from Capital Gains Tax if shares are held for 3 years. There is a “Loss Relief” if shares fail in a company.

Entry Disclaimer

Fusion Funder is a Start-up Crowdfunding Portal ("Site"), operated by Market Signals Trading Corporation and is not registered under Canadian securities legislation. Fusion Funder, and third-party Crowdfunder’s offering investments on this Site, rely on provincial Start-up Crowdfunding exemptions as described in the Start-up Crowdfunding Registration and Prospectus Exemptions (Multilateral CSA Notice 45-316, BCI 45-535, ASC BO 45-521, and OSC-45-506). Fusion Funder does not provide advice about the suitability or the merits of any investment offered by third-party Crowdfunder’s through the Site.

Please be aware that Start-up Crowdfunding investments offered by third-parties through Fusion Funder are risky. If you choose to invest in third-party Crowdfunder’s through the Site, you risk losing all the money you pay for these investments. By accessing this Site, you acknowledge that you have read and understand this Disclaimer and by clicking the Accept button below, you agree to abide by, and consent to, Fusion Funder’s Terms & Conditions and Privacy Policy.

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