Crowdfunding Law (France)

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The crowdfunding law in France allows startups to raise up to €1 million through crowdfunding campaigns.
What are the main aims and objectives?

The aim of changes to the crowdfunding law is to modernize the regulatory framework and provide more favorable conditions for startups and entrepreneurs to raise funds through crowdfunding campaigns. Crowdfunding represents a significant source of funding for startups in France with $1.6 billion raised in 2021 alone, however this remains significantly below the UK which raised $12.6 billion in the same year. The new regulatory framework aligns with the European package for crowdfunding service providers adopted in October 2020 and requires crowdfunding service providers to obtain authorization from the Autorité des Marchés Financiers (AMF) before providing crowdfunding services. 

How does the program work?

The crowdfunding law is governed by a regulatory framework that has undergone significant changes, with Decree 2022-110 and Order 2021-1735 of 22 December 2021 modernizing the crowdfunding framework. 

Decree 2022-110 

Decree 2022-110 is a French regulation enacted on February 1, 2022, that adapts the French crowdfunding framework in response to the EU Regulation 2020/1503 on European crowdfunding service providers for business. This decree, along with Ministerial Order 2021-1735 of December 22, 2021, addresses the consequences of the EU regulation and ensures compliance with it, as well as adjusts the French regulatory framework to better accommodate the evolving crowdfunding industry. The Autorité des Marchés Financiers (AMF) is responsible for authorizing, supervising, sanctioning, and withdrawing the authorization of crowdfunding service providers in France under this updated framework. 

Order 2021-1735 of 22 December 2021 

Order 2021-1735 of 22 December 2021 is a French regulation that modernizes the crowdfunding framework in France. It complements Decree 2022-110 and adapts the French crowdfunding regime to the EU Regulation 2020/1503 on European crowdfunding service providers for business. The Order abolishes the French regime for crowdfunding investment advisers, allowing the Autorité des Marchés Financiers (AMF) to authorize and regulate crowdfunding service providers. There is a 12-month transitional period for existing crowdfunding advisors or intermediaries to obtain authorization from the AMF. This updated framework aims to facilitate the growth of the French crowdfunding market while ensuring compliance with organizational and investor protection rules. 

What is the overall cost?

There are no direct costs attached to the regulatory changes made.  

How was it implemented?

The regulatory authority responsible for the oversight of participants and products in French financial markets, including crowdfunding activities, is the Autorité des Marchés Financiers (AMF). Any person seeking to engage in crowdfunding service activity must obtain authorization from the AMF as a crowdfunding service provider. The new regulations aim to ensure greater transparency and protection for investors while fostering the growth of the crowdfunding industry in France. 

What impact has been measured?

Since the regulatory changes, the French crowdfunding market has experienced significant growth with a 62.2% increase in 2022. The success rates for donation-based projects are also high (75.88% for donations without rewards and 75.54% for donations with rewards). While these figures represent a significant improvement, the governing agencies have not provided any metrics that prove the direct impact of the regulatory change. Consequently, we cannot accurately judge the full influence of the policy.   

What lessons can be learned?

Lack of understanding of the crowdfunding industry amongst the general public and lack of standardization and transparency within the industry have been identified as the two key challenges to expanding access to finance via crowdfunding in France by leading academics on the subject.  

It is also worth noting that France is constrained by EU law due to requirements of the Regulation on European Crowdfunding Service Providers (ECSP), which aims to create uniform rules for investment-based and lending-based crowdfunding services for business financing across the EU. 

Some limitations include: 

  1. Project size: The EU's regulation limits the total amount that can be raised by a single project through crowdfunding platforms to €5 million within a 12-month period. This means that projects requiring larger amounts may need to seek alternative financing sources. 
  2. Investor protection: While the regulation aims to provide better protection for investors, it also imposes strict rules and disclosure requirements on crowdfunding platforms. This might lead to increased operational and compliance costs for platforms, which could be passed on to investors and project owners. 
  3. Supervision by national authorities: The regulation includes strong and harmonized supervisory powers for national authorities overseeing crowdfunding platforms. This might create challenges for some platforms in terms of complying with different supervisory requirements across EU countries. 
  4. Limited to business financing: The ECSP regulation specifically targets crowdfunding services related to business financing, which means that other types of crowdfunding, such as donation-based or reward-based crowdfunding, may not benefit from the harmonized rules. 

Overall, the limitations of the French crowdfunding law are largely in line with the broader EU regulation, which seeks to balance the promotion of crowdfunding as a financing tool with investor protection and regulatory oversight. 

 

CURATED BY

Tom Hancock

Research Associate
Global Entrepreneurship Network
United Kingdom