Policymakers in New Zealand are the latest to give their blessing to the concept of allowing small firms to raise funds from ordinary retail investors via equity crowdfunding.
The country’s government announced today that the cabinet there has approved regulations for crowdfunding and peer-to-peer lending as part of its financial market overhaul.
Under the new regulations, firms engaging in equity crowdfunding and peer-to-peer lending will no longer need to prepare a prospectus or an investment statement before raising funds from the public. There will be no investor caps for equity crowdfunding, although companies will be limited to raising NZ$2 million from crowdfunding each year.
“Crowdfunding provides a platform where contributors receive shares in the businesses they invest in, providing a new avenue for early-stage and growth companies to source the risk-capital they need to grow,” says commerce minister, Craig Foss, in announcing the new rules.
“This is an exciting development for both start-up businesses and investors. With the regulations coming into force on April 1, New Zealand will lead the Asia-Pacific region is the development of crowd-funding regulation,” he said, adding, “Crowdfunding is one of several changes the government is making to support confident and informed participation in New Zealand’s financial markets.”
Last year, Saskatchewan became the first Canadian province to sanction equity crowdfunding, and Ontario has promised to propose a new exemption to allow it early this year.