Gujarat High Court sought details on regulations around Crowdfunding | Current Affairs | Vision IAS
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    Gujarat High Court sought details on regulations around Crowdfunding

    Posted 16 Apr 2024

    2 min read

    • Crowdfunding is solicitation of funds (small amount) from multiple investors through web-based platform or social networking site for specific project, business venture or social cause.
      • Traditional fundraising consists of asking for a sum from limited set of sources.
      • Securities and Exchange Board of India (SEBI) regulates Crowdfunding in India.

     

    • SEBI guidelines on Crowdfunding
      • Only “Accredited Investors” may invest i.e.
        • Companies incorporated under Companies Act, 2013 with minimum net worth of Rs 20 crore
        • High Net Worth Individual with minimum net worth of Rs 2 crore,
        • Eligible Retail Investors who have a minimum annual gross income of Rs. 10 Lacs.

     

    • Benefits of Crowdfunding 
      • Promoting funding to new ideas and encourages startups. 
      • Increases flows of credit to Small, Medium Enterprises.
      • Raising funds during natural calamities.
      • Arranging money for those poor people who can't afford expenses of diseases like cancer etc.

     

    • Risk of Crowdfunding
      • Retail investors may not be able to understand risk in investing start-ups and will be unable to bear loss of investments.
      • Possibility of genuine websites being used by fraudsters.
      • Lack of monitoring of web based platforms leads to risk like terror financing, money laundering etc. 

     

     

     

     

     

    • Tags :
    • Crowdfunding
    • SEBI guidelines on Crownfunding
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