Regulation of crowdfunding in Bulgaria for the first time21 September 2022
Following the latest amendments to the Public Offering of Securities Act (POSA), which entered into force on 1 July 2022, Bulgaria has been introduced to the regulation of crowdfunding or, to use the latest legal term, “collective financing”.
A separate title in the POSA is dedicated to this new legal figure. The changes are dictated by a need to adopt implementing measures for Regulation (EU) 2020/1503, which regulates collective financing at a European level.
Crowdfunding is considered a form of alternative financing for start-ups and for small and medium-sized enterprises that tend to rely on small-scale investments. Such financing may take the form of loans or via acquisition of transferable securities.Regulation (EU) 2020/1503 regulates two main forms of crowdfunding through the use of a crowdfunding platform that enables:
- the facilitation of granting loans; and
- the placing of transferable securities and eligible instruments for crowdfunding purposes without unconditional and irrevocable acquisition obligation (no firm commitment).
The provision of crowdfunding services is an activity that requires a licence. The Financial Supervision Commission (FSC) has been designated as the single competent authority for the licensing and supervision of providers of such services. It should also be noted that for providers’ credit institutions, supervision is carried out by the Bulgarian National Bank. The FSC supervision requirements are similar to those for the other supervised persons.
Given the need to freely transfer investments in the capital markets, the provisions on crowdfunding do not apply to shares in limited liability companies or to linked shares, among other restrictions provided for in Regulation (EU) 2020/1503.
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