An overview on crowdfunding platform license

WHAT IS CROWDFUNDING?

Crowdfunding has become a popular method for raising funds for projects, businesses, and social causes. It involves soliciting small contributions from a large number of individuals through an online platform. With the growing popularity of crowdfunding in India, the government has implemented regulations to ensure the safety and security of investors and donors. In this article, we will provide an overview of the license requirements for crowdfunding platforms in India.

CROWDFUNDING PLATFORMS IN INDIA-

India has witnessed significant growth in the number of crowdfunding platforms in recent years. Some of the popular crowdfunding platforms in India include Ketto, Milaap, Wishberry, and BitGiving. These platforms enable startups, small businesses, and social causes to raise funds from individuals through the internet.

WHAT IS CROWDFUNDING PLATFORM LICENSE?

A crowdfunding platform license is a legal authorization granted by a regulatory authority to a crowdfunding platform to operate in a specific jurisdiction. In India, crowdfunding platforms must obtain a license from the Securities and Exchange Board of India (SEBI) to operate legally. The SEBI (Alternative Investment Funds) Regulations, 2012, provide the regulatory framework for crowdfunding platforms in India. The regulations state that crowdfunding platforms must be registered with SEBI as Category I Alternative Investment Funds (AIFs) and must meet certain requirements to obtain the license.

The license requirements include having a minimum net worth of INR 2 crores, appointing a custodian to hold the funds raised, and having a website with a valid security certificate. The crowdfunding platform license complies with the regulatory framework and provides investors and donors with a safe and secure platform to invest or donate funds.

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HOW TO OBTAIN A CROWDFUNDING PLATFORM LICENSE?

The crowdfunding platform must be set up as a trust, a company, or a limited liability partnership. The minimum net worth of the crowdfunding platform should be INR 2 crores.

The crowdfunding platform should have at least two key management personnel with at least five years of experience in finance or technology.

The crowdfunding platform must appoint a custodian to hold the funds raised from investors.

The crowdfunding platform must have a website with a valid security certificate.

In addition to these requirements, crowdfunding platforms must also comply with specific regulations prescribed by the Securities and Exchange Board of India (SEBI). These regulations aim to protect the interests of investors and donors and ensure the safety and security of funds raised through crowdfunding.

Some of the important regulations prescribed by SEBI for crowdfunding platforms in India include conducting a background check of the promoters and directors, ensuring the funds raised are held in a separate bank account with a custodian appointed by SEBI, providing investors with complete and accurate information about the project or business, and complying with Know Your Customer (KYC) and Anti-Money Laundering (AML) regulations.