The Continuing Conundrum Of Crowdfunding Going The Way Of Private Placement: Analysis And Way Forward
- IJLLR Journal
- 10 hours ago
- 1 min read
Mr. Adityaa Agarwal, B.B.A. LL.B. (Hons.), O.P. Jindal Global University, Sonipat.
ABSTRACT
With the rapid rise of startups and the entrepreneurial ecosystem in the country, crowdfunding has gained significant traction as an alternative means of raising capital. Online platforms facilitating equity-based crowdfunding (EBC) have emerged, allowing startups to connect with retail investors, offering them an alternative to traditional venture capital or private equity funding. However, EBC has faced regulatory challenges, as seen in the cases of Septanove Technologies and Anbronica Technologies, where the Registrar of Companies (RoC) penalized these startups for breaching Section 42 of the Companies Act, 2013 by offering securities to more than 200 persons through their crowdfunding platforms. This paper will focus on the urgent need for a clear regulatory framework to legitimize EBC as a viable funding source for startups and small and medium enterprises (SMEs) in India. It will also provide a comparative analysis of international jurisdictions, suggesting reforms that India can adopt to support its growing startup ecosystem while ensuring investor protection.
Keywords: Private Placement, Crowdfunding, Public Placement, Equity Based Crowdfunding (EBC), Startups, Small and Medium Enterprises (SME), Securities and Exchange Board of India (SEBI), and Registrar of Companies (ROC).
