Crowdfunding: additional or alternative financing of your company

During the last months more initiatives regarding 'crowdfunding' are launched in Belgium. Do you also want to initiate a crowdfunding initiative or invest money through crowdfunding? The Financial Services and Markets Authority (FSMA) has published a notice on crowdfunding on its website. Promoters of crowdfunding projects should be informed by this on the different financial legislations. Consumers are informed on the potential risks.

Financing by the public

Crowdfunding originates in the United States and means 'financing by the mass' or 'financing by the public'. It refers to initiatives whereby money is raised from the public through the internet for a specific goal without intervention of a financial institution. To raise the money the initiator proposes his project and refers to the amount of money he needs to realize the project. The basic idea of crowdfunding is that many consumers invest a small amount of money and that these small investments together finance a project. The invested amount only flows to the promoter or entrepreneur if the total amount is raised within a preset period. If this does not succeed, the money is reimbursed to the private investors. If the amount is raised and the project is finalized, the investors receive a compensation or an agreed part of the profit.

Through crowdfunding financed projects

Commercial, cultural and social projects can be financed through crowdfunding:

an entrepreneur wants to start a project but has insufficient starting capital and therefore issues shares;

a fan club of a singer wants to raise money to finance a cd and repays the fans to the extent the cd is profitable (the most well-known example in Belgium is still SonicAngel which made the fans share in the profit. The fans who invested in the album of Tom Dice received 260% profit per dividend);

a social organization is looking for money to finance a school in a third world country and therefore issues a low-renting loan.

No specific regulation

In Belgium no specific regulation for crowdfunding exists. Several legislations apply. Every promoter can raise 100.000€ in our country. If you exceed this amount, the project is considered as a financial institution 'appealing to public savings' and should the FSMA supply a license. CD&V senator Peter Van Rompuy proposes to increase the threshold of 1000.000€ to 1.000.000€ so more projects can qualify.

Risks for investors

Do you want to invest money through crowdfunding, than you can check the prospectus agreed by the FSMA to assess possible risks. The prospectus contains information on the initiator and the legal form under which the investor invests in the project (e.g. share, loan, ..). The FSMA verifies if the prospectus is complete and comprehensible. On the FSMA's website under 'consumers' - 'searching on lists and warnings' you can check if the initiator and the internet platform are under supervision of the National Bank of Belgium (NBB). If not, than there is no preliminary supervision on the information concerning the project and the initiator. The legal form chosen for the project determines the applicable legal provisions. The protection level of the crowdfunding investors can differ enormously.
Watch out: The fact that the FSMA has approved a prospectus or that the FSMA (or the NBB) have supplied a license does not mean that they find the project appropriate. You should assess the risks of your investment yourself and determine whether a project is appropriate to invest in.

More information (

Notice of the FSMA of 12 July 2012 for promoters of crowdfunding projects
Notice of the FSMA of 12 July 2012 for consumers wanting to invest money through crowdfunding