Crowdfunding has become more popular in recent years and Switzerland is a major centre of world importance. Put in simple words, crowdfunding is a term that describes the collection of money from many sources to finance projects. Partners Urs Kloeti and Oliver Widmer and associate Christian Schneiter of Pestalozzi Attorneys at Law in Zurich delve into the complex details.
The number of investors in a crowdfunding scheme is usually a large one. Each provides an amount (often quite small) to the project developer who publishes details of the project on a designated online crowdfunding platform. Potential investors interested in a project have the opportunity to support it through the platform. Thus, the crowdfunding platforms have a linking function between the investors and the project developers.
Swiss financial markets legislation is designed to be a technologically neutral. As a consequence, there are no specific rules for crowdfunding activities.
Depending on how business models concerning crowdfunding platforms are set up, some parts of the procedure may be covered by financial market regulations and some by the provisions of private law. Thus, participants of crowdfunding business models might be subject to licensing requirements and might have to publish prospecti. Each participant in a crowdfunding business model (such as an investor, a crowd- funding platform provider, a project developer or – more rarely – an escrow agent) ought to find out whether he/it requires a licence and if he/it is obliged to produce a prospectus before embarking on the project.
Four types of crowdfunding
There are four main types of crowdfunding. The main thing that separates them is the re- turn that the investors receive for their funding of the projects. In a nutshell, the four types of crowdfunding are as follows...
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