The Study On Legal Problems Of Crowdfunding In China

Internet finance has become one of the most hottest topics in economic field since2013. Crowdfunding is one of the important modes of Internet finance after the third party payment and peer-to-peer, in which the initiator collects many individual investors’ small investments to support his career, originality and other social activities. Raise funds engage in some project exist since ancient times, but the internet technology made low cost of funds payment and information transmission. Under the background of the strict financial regulation and difficult situation for small and middle-sized enterprises to finance, crowdfunding plays an important role in expanding the direct channel for those enterprises to finance, supporting the real economy to develop and completing the establishment of multi-level capital market. The crowdfunding has a fast development, Since 2014, Alibaba, Baidu, JD.com and other Internet giants are involved in crowdfunding fields, from cultural and creativity, innovative products to equity financing, all the crowdfunding platform is exploring the potential market.However, limited by the requirement of public issue in the Securities Law, the upper limit of 200 shareholders in the Corporation Law as well as the severe punishment on illegal financing required in the Criminal Law, crowdfunding with a number of individuals and small investments is short of legal ground for its development in China. Crowdfunding,especially the equity-based crowdfunding was accompanied by legal risks of illegal financing and illegal fund-raising and illegal securities activities. Management Measures for Private Equity and Equity Crowdfunding Financing(The Trial Implementation)-the Exposure Draft(hereinafter referred to as “Management Measures”) published in December, 2014, regulating the equity-based crowdfunding as the private placement, which deviated from the essential attribute of crowdfunding and couldn’t meet the development of crowdfunding. Under the current legal system, equity-based crowdfunding in China is not public financing in fact, it is more like private equity by public advertising.Thus, this thesis put forward to legal suggestions for standardizing the development of crowdfunding through reviewing current situation of domestic crowdfunding development, analyzing the legal problems faced by crowdfunding and referring to foreign regulatory experience. On one hand, the relevant articles in upper laws should be changed under the background of revising the Securities Law, and the principles of exemption for small –scale issues should be set up in order to make space for the development of crowdfunding. On the other hand, supervision departments should separate crowdfunding from private equity investment to supervise and made detailed relevant regulatory rules for public crowdfunding. The small-scale crowdfunding exemption system should be designed to balance the relationship between financing convenience of small and micro enterprises and the protection of investors’ interests.This thesis is divided into four chapters. Contents of each chapter are listed as follow:Chapter One is the introduction of crowdfunding, mainly including the concept, the classification and the operating mode. Crowdfunding covers commodity crowdfunding, donation crowdfunding, debit and credit crowdfunding and equity crowdfunding. And this chapter attaches more importance to introducing the equity-based crowdfunding.Chapter Two introduces the developing environment of crowdfunding at home and abroad. Based on the JOBS Act,and the Management Measures of China, the author conducts analyses and takes the equity-based crowdfunding platform-“Everyone Invest In” as an example to raise a series of existing legal problems of crowdfunding in China.Chapter Three conducts specific analyses on the existing problems of crowdfunding in China. The reality that laws fall behind finance has triggered a series of legal problems, specifically reflecting in aspects such as the risk of illegal financing and illegal security activities, the conservative ideology in the Management Measures and the lack of protection in investors’ rights and interests.Chapter Four deals with the legal suggestions on standardizing the development of crowdfunding financing referring to relevant experience in the JOBS Act and based on the domestic law situation. Firstly, supervision departments should make detailed relevant regulatory rules for public crowdfunding on the basis of revision of upper laws. Secondly, specific exemption system for small-scale crowdfunding should be designed to balance the relationship between financing convenience and the protection of investors’ rights. Finally, the regional equity trading market could be a ideal testing ground to sum up experience, then gradual popularization, aiming at promoting the development of crowdfunding industry in China and completing a multi-level capital market.