The Law on Crowdfunding (also known as the Law on Raising Capital), which came into force in Russia at the beginning of this year, clarifies the use of investment platforms and introducing amendments to certain acts, Lexology writes in an analysis of the legislation.
According to the website, the law offers new, alternative tools for raising capital for small and medium-sized businesses, introduces the concept of an investment platform and utility digital rights and outlines the terms for using these platforms in Russia and requirements for the operators of investment platforms.
The new law defines an ‘investment platform’ as an online information system that concludes investment agreements by using information technologies. Access to these platforms are provided by their operators.
According to the law, an operator needs to meet a set of requirements: it must be a Russian legal entity with no less than 5 million rubles ($76,000) of its own funds. The operator must not conduct any other financial activity than that of the investment platform, and it also must be included in the registry of operators of investment platforms at the Bank of Russia.
The central bank is the supervising authority, which oversees the activities of the platform operators. It has the power to create secondary regulations and audit the operators.
Investors are defined as individuals or legal entities that receive the services of the investment platform. The law provides the following forms of investment available on: loans; the purchase of issued securities (based on a closed subscription); and the purchase of utility digital rights.
The term ‘utility digital rights’ was incorporated to define the concept of a ‘token’, which is actively used in crowdfunding and initial coin offering (ICO) spaces. In other words, the law codifies the first type of digital rights in Russian law.
Investments for a project through these platforms can be made by any person, including unqualified investors and individuals not registered as individual entrepreneurs. Individuals can invest up to 600,000 rubles ($9,126) in one calendar year. This limitation does not apply to individuals registered as individual entrepreneurs or qualified investors, or in the case that the investor purchases the utility digital rights through a joint stock company.
The new law has set a 1 billion rubles ($15.2 million) limit on capital investments on a platform in one calendar year for a company or individual entrepreneur. However, this limit does not apply to the sale of utility digital rights issued by a joint stock company, Lexology writes.