Analysing Legal Position Of Equity-Based Crowdfunding In India And Comparative Analysis With The USA
- IJLLR Journal
- May 24
- 2 min read
Shreya, Assistant Professor, School of Law, Pimpri Chinchwad University, Pune
Sujata Biswas, Independent Legal Researcher and Practitioner, New Delhi
ABSTRACT
This paper analyses the legal position of equity-based crowdfunding in India through a comparative study of the regulatory framework in the United States. Equity crowdfunding enables startups and small enterprises to raise capital from a large number of investors through online platforms in exchange for equity securities, thereby emerging as a significant alternative to conventional financing mechanisms. While the United States has developed a comprehensive regulatory framework through the Jumpstart Our Business Startups (JOBS) Act and Regulation Crowdfunding, India continues to lack a dedicated legal regime governing equity crowdfunding.
The paper examines the existing Indian legal framework under the Companies Act, 2013, the SEBI Act, and related securities regulations, highlighting the challenges of applying traditional private placement provisions to digital crowdfunding models. It further analyses key judicial and regulatory developments, including the Sahara case and recent actions initiated by the Registrar of Companies against crowdfunding-linked issuances, to demonstrate the regulatory uncertainty surrounding such activities in India. The study also evaluates SEBI’s 2014 Consultation Paper, which proposed a regulated crowdfunding framework limited to accredited investors and recognised intermediaries, but has not yet been implemented.
In contrast, the paper explores the comparatively structured framework adopted in the United States, focusing on investor eligibility, issuer obligations, intermediary regulation, disclosure requirements, and restrictions on transferability of securities. Through this comparative analysis, the paper argues that India’s restrictive and uncertain regulatory approach may hinder innovation and limit access to capital for startups and SMEs. It concludes by emphasising the need for a balanced regulatory framework that simultaneously promotes entrepreneurial growth, technological innovation, investor protection, and market transparency within India’s evolving financial ecosystem.
