The adoption of the Law on Crowdfunding by the Lithuanian Parliament, on 3 November 2016 marks a new phase for the crowdfunding market in Lithuania. The new regulation will come into force on 1 December 2016.
The necessity for alternative financing in Lithuania is given by the fact that 50 percent of Lithuanian residents hold their savings in cash, according to the information provided by the Bank of Lithuania. Beyond the necessity to create alternative investment opportunities, lies the Lithuanian ambition to become one of the most attractive FinTech destination in Europe.
The Law on Crowdfunding allows to establish debt based and equity based crowdfunding platforms, while it does not apply to donation based and reward based crowdfunding. Legal entities are authorized to be operators of a crowdfunding platform, as long as they are domiciled in the Republic of Lithuania. The only exception to the Law concerns those legal entities that are established in other Member States in accordance with legal acts: they are authorized to act as intermediaries in forming transactions for financing.
Before to start their activities as operators of crowdfunding, however, legal entities will have to inserted in the Public List of Crowdfunding Platforms Operators, managed by the Bank of Lithuania. The crowdfunding operators will have the possibility to raise capital through four different instruments: a) simple loan agreement; b) bonds; c) shares; or d) assignment of claim rights deriving from credit agreements already concluded.
An interesting aspect of the Lithuanian regulation regards the absence of restrictions for the maximum amount to be invested. Investors can operate without limits from this point of view; in any case, the platform operators must carry put assessment of appropriateness of the specific type of financing for that investor, informing the customer in case the type of financing transaction is not acceptable for him.
An article published by TVINS describes the relevant facilitations concerning the capital requirement for operators: the minimum amount needed to operate is EUR 40,000. Furthermore, if the offering ranges from EUR 100,000 to EUR 5 million in 12 months, the crowdfunding operators have to draft just an information document about the project owner and the proposed project. Offerings above EUR 5 million will require a prospectus, however.
According to the law firm Sorainen, the Law on Crowdfunding aims at transforming Lithuania in a welcoming background for hybrid crowdfunding platforms with ambitions of global expansion. It is noticeable that the balanced regulation approved by the Lithuanian Parliament has also been due to the cooperation of Sorainen itself, that was involved in the legislative procedure and suggested several ideas which were successfully implemented in the law.