Act dated 7 July 2022 on crowdfunding for business ventures and helping borrowers (hereinafter: the Act) introduces important changes for limited liability companies seeking funding.
The provisions of the Act are to align Polish legislation with those of the European Union (Regulation (EU) 2020/1503 of 7 October 2020 on European providers of crowdfunding services for economic activities and amending Regulation (EU) 2017/1129 and Directive 2019/1937 – hereinafter: ‘ECSP Regulation’) on crowdfunding for business ventures and regulation of crowdfunding platforms.
Under Article 48 The Act prohibits the public offering and promotion of acquisitions or acquisitions of shares in a limited liability company.
So far one of the most commonly used forms of financing for business development by entrepreneurs, especially at the initial stage of development (the so-called start-ups) was the issuance of new shares and their offer through crowdfunding platforms. Although, in accordance with the provisions of the Commercial Companies Code, shares in limited liability companies in the Polish trading company system are not intended for public trading, as demonstrated by the formal requirements for the sale of shares, there were no rules that would prohibit the public offering of shares in the limited liability company.
The Act prohibits:
- to bid for acquisitions of shares in a company not designated to the addressee;
- promote the acquisition of shares in the company by directing advertising or other forms of promotion to an undesignated addressee;
- to bid for new shares in a company not designated to the addressee;
- promote the acquisition of new shares of the company by directing advertising or other forms of promotion to an undesignated addressee.
The explanatory memorandum to the draft law states that the new rules are introduced to ensure a level playing field for companies with different legal forms. The Act will introduce in the Commercial Companies Code provisions prohibiting the public promotion of acquisition and acquisition of shares in limited liability companies.
Consequently, the possibility of divesting shares in limited liability companies using the services of non-supervised entities will be excluded. This means that it is not possible to publicly promote the acquisition of such shares through Internet portals that are analogous to platforms operated by providers of social finance services.
The legislator states in the explanatory memorandum that the concept of ‘promoting’ should be understood as directing advertising and other forms of promotion to an undesignated addressee.
In practice, the amendment will limit the ability of limited liability companies to raise capital. As regards the possibility of raising capital for development, a limited liability company will be able to raise finance only through debt financing, i.e. issue bonds or borrow. This also means that entities operating crowdfunding platforms will have to drastically change their business model.
The new rules will be further sanctioned. Promoting the acquisition or acquisition of shares or proposing the acquisition of shares to an unmarked addressee will be subject to fines, imprisonment or imprisonment. 6 months.