Please read carefully before initiating a Campaign
WARNING:THIS SECTION TARGETS PROJECT OWNERS (CREATORS) ONLY
FUNDERS, ESPECIALL INVESTORS, ARE STRONGLY ADVISED NOT TO RELY ON OUR POLICIES AGAINST MISUSE (mainly presented in this section) AND TO BE VERY CAREFUL IN MAKING INVESTMENT DECISIONS.
WINNERSFUND DECLARES THAT, WHEREVER APPLICABLE, THE USE OF THE WORD “PROTECTION” ONLY RELATES TO ITS BEST EFFORTS, TAKING EVERY REASONABLE CARE AND ADOPTING APPLICABLE BEST PRACTICES, TO REDUCE PLATFORM MISUSE WITH REGARDS TO FRAUDULENT AND MONEY LAUNDERING ACTIVITIES.
WINNERSFUND DOES NOT ASSURE NEITHER GUARANTEES IN ANY WAY THAT THESE DANGERS ARE ELIMINATED AND DOES NOT STATE, OR IMPLY IN ANY WAY, THAT IT REDUCES THE RISKS ASSOCIATED WITH ENTREPRENEURSHIP AND INVESTMENT ACTIVITIES.
WINNERSFUND POLICY AGAINST EQUITY CROWDFUNDING MISUSE
All Campaigns for Equity-based Projects are required to oblige with the following terms and conditions:
- Floor limit: The lowest targeted amount for Campaigns offering Equity is 24,000 Euros (including a cap of 13% for fees, setup costs, administrative and professional service fees reasonably expected to be paid to third parties, like lawyers, accountants etc).
- Universal application of Prospectus Directive rules: With the exception of the UK, funding Campaigns for amounts of requested capital between 100,000 and 5,000,000 Euros per company per 12-month period may only be hosted when a "Prospectus", as defined in Prospectus Directive (2010/73/EC), is licensed by or registered with a competent state authority, i.e. a Capital Markets Commission of an EEA country. If you wish to find out more about how these rules apply, please check our Campaigns Reach page.
- Funding target threshold: The highest funding target for all Campaigns is 100,000 Euros without holding a Prospectus and 5,000,000 Euros when holding a "Full Prospectus".
- Mini Business Plan for all Campaigns: All Campaigns require the filling of certain forms in the platform, that altogether compile a mini Business Plan. This aims at providing the prospective Funders with a clear understanding on each Project.
- Full Business Plan for Campaigns run by companies as Project Owners: Any Campaign run by an established Company requires the uploading of a full Business Plan (unless a Prospectus is presented).
- Business Plan validation for Campaigns run by individuals as Project Owners: When the Project Owner is an individual, after the Campaign closes successfully and prior to funds release, a Business Plan must be submitted for review to a renowned management consulting firm, a chartered accountant or an auditor.
- Proactive screening of Project Owners: As explained in our Best Practices page, all Project Owners are requested to provide to WinnersFund and request from their Funders extensive documentation following the Campaigns’ successful closure and prior to funds release.
If a Campaign offering Equity closes successfully, both the Project Owner and the Company that will materialise the Project shall be required to contractually oblige with the following crowdfunding investor protection clauses prior to funds release:
- Company type: In order to ensure that Funders shall not be held personally liable for possible future losses, only companies with liability limited by shares, whether public or private (Plc / Ltd in the UK, depending on the total nunber of shareholders), are allowed to be funded via WinnersFund.
- Uniform and standardised service: Individual, as well as corporate Project Owners, must follow a certain procedure prior to receiving the funds. Individual Project Owners should establish a company using unifirm templates of statutes our legal department provides. Similarly, corporate Project Owners have to proceed to a capital increase following the guidelines and statute amendment clauses presented hereinafter.
- Classes of Shares: All companies that will be established following the successful closing of a crowdfunding Campaign will be required to have the following classes of shares (with variations, depending on the jurisdiction where the company will be established), while pre-existing companies that will materialise crowdfunded Projects shall be required to modify their statutes in a way that will protect crowdfunding investors in the following manner:
A. Class A shares are reserved for founders (for new companies) or current shareholders (for pre-existing companies). Class A shareholders retain ordinary voting rights not less than 1:1 over the shares they hold and have no dividends preference against Class B shareholders. Class A shareholders are to be served after Class B shareholders in case of winding up.
B. Class B shares are reserved for crowdfunding investors (Funders through WinnersFund). Throughout the Monitoring Period (please read below), Class B shareholders appoint the Bank Signatory for the special reserve (please read below), retain voting rights not less than those holding Class A shares and preference of first dividends. Class B shareholders are the first to be served in case of winding up. All Class B shares are freely transferrable.
C. Class C shares are available to all other (future) investors. Throughout the Monitoring Period, the Company’s General Meeting determines Class C rights and privileges, as well as those of any future classes of shares, with the consent of Class B shareholders majority.
D. Both A and B class shareholders will be entitled to the same (equal and proportional) preference rights upon any new shares issuance. All class A and B shares are equal in dilution / anti-dilution rights and preferences.
- Monitoring Period: All companies funded via WinnersFund must be audited by external chartered auditors throughout a monitoring period of three (3) years, following the receiving of funds collected through Crowdfunding. At the end of this period, a valuation of the Company must be prepared in cooperation with the auditors and communicated to all shareholders.
- Special Reserve formation: Funds collected via WinnersFund will be placed in a Special Reserve account of the crowdfunded Company and shall only be used for the materialisation of the crowdfunded Project as prescribed in the Business Plan. Funds collected through a WinnersFund Campaign are never handed to the individual Project Owners or the company shareholders.
- Bank co-signatory: Class B shareholders have the right to appoint a Bank co-signatory for the Bank Account of the Special Reserve. Such a co-signatory must be a chartered public accountant or an accredited auditor. The Bank co-signatory is obliged to agree with fund release orders placed by the Company Management when they are consistent with the Business Plan related to the crowdfunded Project. A dispute resolution process shall to be included in the company’s statutes in case of disagreement.
- IFRS: After receiving the funds, all companies must follow the International Financial Reporting Standards.
Depending on the overall funding, some of these restrioctions may also apply in Reward-Based-only Campaigns, following the examination on a case-by-case basis.
CAMPAIGNS INITIATED BY ESTABLISHED COMPANIES
There is always the question about the pros and cons of investing in long-existing companies.
It is almost inevitable for companies, even the most reputable ones, to carry debts, to suffer liabilities and to face all kinds of problems, whether big or small, that may directly and indirectly affect a shareholder's position. With regards to crowdfunding, the most important consideration is that the company's debts and other liabilities may affect the availability of the capital, collected through crowdfunding, in financing the Project it has been collected for, especially when the company owns to preferred creditors (like its employees or the state). The compliance procedure with regards to crowdfunding may also prove to be a lengthy and difficult process.
Therefore, every established company wishing to engage in Equity-Based Crowdfunding through WinnersFund is strongly encouraged to promise when initiating a crowdfunding Campaign that it will execute the Project through a subsidiary to be formed in the event of Campaign success. Otherwise, it must promise that it will allow for extensive legal and financial Due Diligence by the prospective investors prior to funds release, providing them with all the documentation they will require.