Eternity Law International — News — Crowdfunding in Portugal

Crowdfunding in Portugal

Published:
January 3, 2024

Presently, in Portugal, if you aim to transform crowdfunding into a business endeavor, securing the green light is a must. This obligation doesn’t extend to individuals merely availing themselves of these platforms. Nevertheless, given the entrepreneurial nature of this pursuit, it draws parallels with stock dealings, thus warranting regulatory measures. Crowdfunding in Portugal commenced grappling with this matter in 2015, emphasizing the enactment of a new law during that period, aligning it with the Portuguese Securities Market Commission. This legislative move solidified the notion that crowdfunding closely mirrors stock initiatives, a facet we delve into presently.

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Public Fundraising

Portugal, in sync with its European Union counterparts, has charted a course towards instituting indigenous regulations for fundraisers, harmonizing seamlessly with the broader international accords of the EU. A more lucid demarcation of public fundraising has been proffered, encapsulating all voluntary contributions seamlessly assimilated into the sphere of investment undertakings. When scrutinizing this nation’s landscape, avenues for participation manifest through the ensuing modalities:

  • Enormous-scale benevolence unfolds, depicting a scenario where individuals inject funds into a promising venture devoid of any anticipation for subsequent monetary gains.
  • Generosity tethered to prospective non-monetary gratifications materializes. As an illustration, a game developer may extend exclusive privileges to those supporting the project, like embedding contributors’ names in the credits or incorporating suggested elements into the game.
  • A donation-lending hybrid takes shape. Participants contribute funds with the expectation of an eventual reimbursement. Driven by faith in the projects and a desire to see them materialize, financial support is provided, with the hope of recouping contributions down the road, possibly coupled with supplementary incentives to spur involvement.
  • Public fundraising grounded in investment frameworks emerges. Essentially mirroring stock maneuvers, individuals invest fiscal resources into projects, securing a fractional ownership stake that holds the potential for appreciation and resale. This transcends simple public donations, introducing a dimension akin to financial engagement in projects.

Legal and Regulatory Requirements

Portugal’s legal structure intricately interlaces with the expansive European legal scaffold, embellishing it with supplementary domestic directives. Unpacking the intricacies of wholly and lawfully kickstarting fundraising or establishing a platform orchestrating these dealings from external entities warrants scrutiny. The pivotal prerequisites encompass:

  • Enlistment with CMVM is obligatory: The crowdfunding platform in Portugal is mandated to enlist with the Securities Market Commission, the overseeing authority entrusted with the governance and oversight of crowdfunding undertakings in Portugal. Enrollment necessitates adherence to well-defined regulations.
  • Clarity is paramount: Platforms are compelled to furnish unambiguous, precise, and open information pertaining to projects or entities soliciting financial backing, along with the attendant perils. This encompasses divulging details about project objectives, fund utilization, investment hazards, and reimbursement protocols.
  • Financial constraints are delineated: Legislation stipulates caps on the sums procurable in each instance. For instance, in investment crowdfunding, the highest ceiling stands at 2.5 million euros. These constraints are formulated to shield investors and forestall the undue aggregation of resources in specific ventures.
  • Safeguarding interests takes precedence: The legal framework strives to safeguard investors by instating transparency. Platforms are obligated to evaluate the appropriateness of investments for each individual to ensure cognizance and comprehension of associated risks. Furthermore, contingent on specific scenarios, investors may possess the entitlement to rescind their investments and receive a reimbursement equivalent to the invested amount.

Advantages

Ventures into public fundraising stand out as an ingenious remedy, not confined to the European Union but spanning the global expanse. In cases where an innovator harbors a brilliant concept yet lacks the fiscal wherewithal, embarking on fundraising becomes a viable avenue, albeit under certain stipulations. This route proves more secure than opting for a loan, steering clear of explicit interest impositions. Even in the event of a project’s non-fulfillment, the ensuing legal and fiscal entanglements pale in comparison to loan-related predicaments. A parallel scenario unfolds for those desiring the fruition of a creation but balking at substantial investments for an unfamiliar developer. Modest contributions, aggregating to a substantial sum in the broader context, become a conduit to assist specific projects.

Final Thoughts

Portugal’s legal structure for crowdfunding lays down a gamut of regulations and duties, intending to find a middle ground between fostering communal financing and safeguarding investors. Platforms, those orchestrating projects, and the investors themselves must acquaint themselves with these regulations and conscientiously fulfill their legal duties. For a more nuanced and current understanding of this domain, delving into the latest legislation and consulting with legal experts is advised.

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