The Financial Services Commission of Mauritius (FSC) released the Financial Services (Crowdfunding) rules on 10 September to create a new regulatory framework for crowdfunding, in line with its strategy to sustain the growth of the Fintech ecosystem within the Mauritius International Financial Centre.
The International Organisation of Securities Commissions (IOSCO) defines ‘crowdfunding’ as: “An umbrella term describing the use of small amounts of money, obtained from a large number of individuals or organisations, to fund a project, a business or personal loan, and other needs through an online web-based platform.”
The FSC said it is confident that a new regulatory framework on crowdfunding would contribute to shape and improve access to finance for individuals, entrepreneurs, micro enterprises as well as Small and Medium Enterprises (SMEs). With crowdfunding being conducted in a regulated environment, investors will be encouraged to contribute, through small investments, to the growth of SMEs and the entrepreneurial sector in Mauritius.
Having conducted a benchmarking exercise of the regulatory frameworks and best practices on crowdfunding in other jurisdictions, the FSC has set out a comprehensive framework for investment-based crowdfunding which will complement the enabling framework for peer-to-peer lending that was introduced last year.
FSC Chief Executive Dhanesswurnath Thakoor said the two frameworks will foster innovation and facilitate access to finance to SMEs. “The introduction of these rules on investment-based crowdfunding represents another key regulatory milestone for the FSC. It demonstrates the fruitful collaboration between the regulator and the industry with the objective of enabling the provision of new financial products/services for the ultimate interests of our stakeholders.”
No person will be permitted to operate crowdfunding platforms in or from within Mauritius without a crowdfunding licence issued by the FSC. The objects of a crowdfunding operator will be limited to the operation of the crowdfunding platform and operations arising directly from it.
A crowdfunding operator must be a legal person incorporated in Mauritius and licences will only be granted subject to adequate resources, infrastructure, and staff with the appropriate competence, experience and proficiency.
A crowdfunding operator must maintain a commercial presence in Mauritius by having its principal place of business in Mauritius, from which the core activities are performed. It must be managed by a board of directors composed of a minimum of three directors, of which at least 30% must be independent directors and one must be resident in Mauritius.
A crowdfunding operator will be required, at all times, to have a minimum unimpaired stated capital of MUR2 million (approx. USD50,000) or its equivalent in any other currency, or a higher amount if determined by the FSC.
An issuer must not offer to raise an amount exceeding MUR10 million on a crowdfunding platform. The maximum investable amount for a retail investor to invest on a crowdfunding platform over a 12-month period must not exceeding MUR350,000. No investment limit applies to expert investors.
A crowdfunding operator must ensure that investors who have committed to providing funding to an issuer may withdraw the commitment, without any penalty other than reasonable administrative costs and without giving a reason, within a period of not less than 48 hours following the end of the commitment period.
A crowdfunding operator is required to conduct due diligence on each issuer prior to allowing the issuer to raise funds using the crowdfunding platform, and on each investor providing funding on its platform.
A crowdfunding operator may or may not handle funds on behalf of investors. If a crowdfunding operator acts as an intermediary in the collection of funds from investors, it must hold such funds on escrow until the specified financing criteria is fulfilled and then transfer such funds to the issuer. It must have a dedicated non-interest-bearing escrow account for each project that is held in a commercial bank that is licensed by the Bank of Mauritius.