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SEC issues debt crowdfunding regulations



Wednesday 22 May 2019 | No. 55 / 2019


Bangkok, 22 May 2019 – The SEC has issued regulations on debt crowdfunding through funding portals to increase alternative fundraising methods for small and medium-sized enterprises and startups.

SEC Assistant Secretary-General Praoporn Senanarong said: “The debt crowdfunding* scheme is part of the SEC’s regulatory efforts to support the governmental policy on promoting greater access to alternative financing resources for SMEs and startups to raise fund and expand their business growth. The new scheme follows a similar regulatory framework governing the existing equity crowdfunding rules.   


Pursuant to the new regulations, an eligible fundraiser for the crowdfunding scheme must be a Thai company having a clear business plan. With respect to financing limit, an SME or a startup may raise capital from retail investors at the maximum amount of 20 million baht during the first 12 months and at total not more than 40 million baht (equity and debt combined) throughout the whole project. The fundraiser is also required to report the offering results to the SEC.   

 

Interested investors are advised to study the crowdfunding scheme carefully from all angles before making an investment decision, from the opportunities and the associated risks to the terms and conditions. This is because applicants for the crowdfunding option are generally SMEs and startups with a small business size or at the initial stage of their operation, and thus exposed to high risks, including business risk, obligations of the offered debts, trading channels and transfer limitation.

In addition, to manage risks and potential impacts on investors, the new crowdfunding regulations prescribe the investment limit of 100,000 baht per business (equity and debt combined) and the annual investment limit of 1 million for each retail investor. There is no investment limit for non-retail investors.**      

 

The crowdfunding must be conducted through a funding portal approved by the SEC. Funding portals play the pivotal role of screening eligible companies and overseeing their information disclosure. The SEC does not grant an approval for each crowdfunding project or supervise pre-offering disclosure.

 

To be eligible for a funding portal approval, an applicant must have the same qualifications and work systems required for equity crowdfunding, and must also have a system for assessing credit worthiness and risks of the debt fundraisers. Currently, there are several companies interested in applying for an approval to operate a debt funding portal business.

 

In addition, the SEC has amended the overall crowdfunding requirements to be more consistent with other regulations. This includes the revision to the definitions of private equity trust and venture capital business in line with the digital token offering rules, and the amendments to the rules governing equity trading in the secondary market in line with the primary market offering rules.

 

The debt crowdfunding regulations have come into force since 16 May 2019. Earlier, the proposed regulations completed the focus group and public consultation sessions on 28 January 2019. Those interested in applying for a funding portal approval can view the related regulations at www.sec.or.th.    

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* Crowdfunding is a method for raising fund from investors through a funding portal on the Internet. It is another channel for SMEs and startups to access capital sources through issuance and offering for sale of equity or debt securities.  

** Non-retail investors are institutional investors, venture capital businesses, private equity trusts and qualified investors.






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