What are the rules to be observed while operating a crowdfunding platform in Colombia?19/10/2018
Even while crowdfunding activities were not regulated until recently, Colombia has not remained indifferent to the industry that is expected to be worth more than USD 70 billion by 2019 and up to USD 150 billion by 2025. In fact, the country has presented a sustained increase in collective financiation start-ups, successfully funding over 400 enterprises, and having projects that have risen more than USD 160.000 in just one day.
Gladly, crowdfunding initiatives in Colombia won’t continue to operate within the gray areas of law, as this activity was finally regulated by Colombia’s government on July 31, 2018, through Decree 1357 issued by Ministry of Finance and Public Credit. This decree establishes clear grounds for starting and conducting a crowdfunding company.
Firstly, Crowdfunding was defined by law as a “A new the stock market activity, which can be performed by stock exchange companies, trading administrators and stock corporations with exclusive dedication, all which must be surveilled by the Colombia’s Financial Superintendency“, and the performing of these activities is authorized through platforms, webpages and similar sorts of electronic communication.
Stock corporations dedicated to crowdfunding activities must be enrolled in the National Register for Stock Market Agents, as well as guarantee the continuity and regularity 0f the mechanism used to perform crowdfunding financiation, by creating the right resources and procedures that are fitted to the size and complexity of the business to be developed. In the same sense, the company must have proper accounting and administrative procedures, internal control mechanisms, an internal regulation code and risk control/cyber security protocols.
In addition, each initiative to be financed won’t be able to have a raising period longer than 6 months from the moment of its publication, and must have a plural number of contributors, which even when not limited by law, can be limited by each platform administrator. These administrators can also set up a minimal raised amount that will be required in order for the initiative to receive the raised money, which means if the initiative does not raise the minimal amount, the money will be return to contributors, in an attempt to guarantee that the funds will be used for the initially stated purpose.
When it comes to the maximum amount that can be raised for each campaign, the regulation establishes a limit of 3.000 colombian minimum salaries, equivalent to over USD 750.000; however, if there is a “qualified contributor” participating in the project, the limit will be raised up to 10.000 colombian minimum salaries, equivalent to over USD 2’500.000, leaving a fairly reasonable raising range for crowdfunding companies
Finally, regulation also established a limitation for contributors, as they will not be able to donate more than 20% of their annual income or net worth to collective financiation; gladly, the nationality of the contributors will not be an obstacle, as both foreign citizens and companies are allowed to donate.
Considering all that has been stated before, it is reasonable to conclude that Colombia’s government created a regulation that allows both national and international parties to enroll in the development of crowdfunding projects, while not being subject of excessive limitations or unreasonable funding restrictions. Overall, the regulation of crowdfunding can be seen as an invitation to stimulate the visible growth the industry has had in the country so far.