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Italy is the first Country to fully implement a complete legal framework for equity crowdfunding, with very interesting features and an international vocation, allowing people from all over the......

Italy is the first Country to fully implement a complete legal framework for equity crowdfunding, with very interesting features and an international vocation, allowing people from all over the world to crowdfund in Italy.

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  • Ciao, le norme in merito sono piuttosto sommarie. Si dovrà fare riferimento ai principi contabili, con tutte le difficoltà che ciò comporta per le aziende innovative e per le start up. C'è ampia libertà per la disclosure, oltre ad una base minima, e quindi credo che la qualità e comprensibilità delle informazioni fornite saranno un interessante elemento competitivo.
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  • Ciao Alessandro,

    Ma gli aspetti finanziari dell'offerta, tipo il prezzo delle azioni? ci sono indicazioni per i metodi di valutazione o per i disclosure standarda? sarà necessaria l'intermedizione di un commercialista, come negli US con i CPAs?
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  • 1. Alessandro M. LERRO Las Vegas, October 15, 2013 2° Annual Global Crowdfunding Convention and Bootcamp EQUITY CROWDFUNDING: the ITALIAN FRAMEWORK
  • 2. …2000$ maximum ? ©2013 A.M. Lerro
  • 3. …$1M maximum ? ©2013 A.M. Lerro
  • 4. PLATFORMS – BROKER-DEALERS – CAMPAIGN OWNERS – INVESTORS ©2013 A.M. Lerro
  • 5. workshop EQUITY CROWDFUNDING IN ITALY By Alessandro M. LERRO ©2013 A.M. Lerro
  • 6. LAW: LAW n. 221, Dec. 17, 2012 “2.0 Growth Decree” REGULATION: CONSOB Reg. n. 18592 June 26, 2013 ©2013 A.M. Lerro
  • 7. AS PRESIDENT OBAMA, WE BELIEVE IN EQUITY CROWDFUNDING HIGH POTENTIAL AND CAPACITY TO RAISE PRIVATE INVESTMENTS And we have found some confirmation in MASSOLUTION’s INDUSTRY REPORT ©2013 A.M. Lerro
  • 8. ©2013 A.M. Lerro
  • 9. 2012 C.F. VOLUMES “BUSINES” MOTIVATION “BUSINESS” VOLUMES Reward-based 383,000,000 16,3% 62,477,000 Lending-based 1,169,700,000 54,2% 633,977,000 Donation-based 979,300,000 12,8% 125,350,000 Equity-based 111,700,000 TOTAL 2,643,700,000 111,700,000 ≈35% 933,500,000 35% OF THE 2012 CROWDFUNDING VOLUME HAS BEEN COLLECTED IN THE BUSINESS AND ENTREPRENUEURSHIP CATEGORY ©2013 A.M. Lerro CROWDFUNDING MODEL
  • 10. ©2013 A.M. Lerro
  • 11. ©2013 A.M. Lerro
  • 12. - 6,7M$ max per year - Any nationality (platform, target, investors, …) - Registered Platforms - No investment limit per person - Investment concluded through Broker-Dealers - Free sale of the shares (incentives to keep them) - STRONG consumers’ protection - 5% equity: Professional Investors ©2013 A.M. Lerro BASICS
  • 13. CONSOB BROKER-DEALER PLATFORM TARGET Co. INVESTORS ©2013 A.M. Lerro
  • 14. CONSOB: IS THE ITALIAN SECURITIES AND EXCHANGE COMMISSION, THE EQUIVALENT OF SEC, WHOSE TASKS ARE REGULATION, SUPERVISION, VIGILANCE ©2013 A.M. Lerro
  • 15. EUROPEAN UNION: A single authorization system has been created for INVESTMENT FIRMS, to enable them to do business anywhere in the EU, with a minimum of red tape, while increasing customer protection. HARMONISED REQUIREMENTS govern the activity of AUTHORISED INTERMEDIARIES ©2013 A.M. Lerro
  • 16. RESPECT OF RULES AND COMPETITION INVESTORS PROTECTION CROWDFUNDING: MAIN TASKS STABILITY AND PROPER OPERATIONS OF THE FINANCIAL MARKET MAINTAINING TRUST IN THE FINANCIAL SYSTEM ©2013 A.M. Lerro
  • 17. INVESTIGATION POWERS: Communication of news and data Transmission of documents Inspections International collaboration with other Authorities ©2013 A.M. Lerro
  • 18. PENALTIES: FINES • From 500 to 25.000 euro fine BANS • Suspension • Radiation INJUNCTIONS • Stop operations • Stop irregularities • Order limitations ©2013 A.M. Lerro
  • 19. CONSOB manages: ©2013 A.M. Lerro
  • 20. CHAMBER OF ARBITRATION: CONSOB manages an arbitration chamber to solve conflicts between Investors and Broker-Dealers. ©2013 A.M. Lerro
  • 21. CONSOB BROKER-DEALERS PLATFORM TARGET Co. INVESTORS ©2013 A.M. Lerro
  • 22. BROKER-DEALERS: • Having established business in Italy • Authorized in their home Country • Need to be authorized by CONSOB OWNERS of the BROKER-DEALER : ANY NATIONALITY ©2013 A.M. Lerro
  • 23. BROKER-DEALERS: BANKS and INVESTMENT Co.s Take in charge the PAYMENT, the execution of the investment, once the investor has decided to pledge. (… at least…) ©2013 A.M. Lerro
  • 24. BROKER-DEALERS: BANKS and INVESTMENT Co.s CAN EITHER: MANAGE A CROWDFUNDING PLATFORM THEMSELEVES PARTNER WITH A CROWDFUNDING PLATFORM ©2013 A.M. Lerro
  • 25. MIFID PROCEDURE: IDENTIFICATION OF THE CLIENT ANTI-LAUNDERING RULES INVESTMENT PROFILE TO MATCH WITH PROCLIVITY TO RISK INVESTMENTS MIFID = European Union Directive, Markets in Financial Instruments and investment services ©2013 A.M. Lerro
  • 26. MONEY PLEDGED: All money pledged must be deposited with a brokerdealer, outside availability of the Platform, on a bank account registered in the name of the Target Co.. ©2013 A.M. Lerro
  • 27. ADVISING: Broker-Dealers may advise and give suggestions, within their general rules. Platforms may not provide recommendations suitable to influence pledges. PLATFORMS BROKER-DEALERS   ©2013 A.M. Lerro
  • 28. THE BANK OF ITALY has cuncurrent competence with the following tasks: -RISK REDUCTION -ASSET STABILITY -SAFE AND CAREFUL MANAGEMENT But PLATFORMS are not included in the scope of action, as they may not handle money and are only communication and information vehicles. Instead, BROKER-DEALERS are regularly monitored ©2013 A.M. Lerro
  • 29. CONSOB BROKER-DEALERS PLATFORM TARGET Co. INVESTORS ©2013 A.M. Lerro
  • 30. CROWDFUNDING PLATFORMS: ONLINE PLATFORMS, WHOSE EXCLUSIVE PURPOSE IS TO HELP COMPANIES TO RAISE EQUITY FROM THE CROWD (art.1.5.9 TUF) ©2013 A.M. Lerro
  • 31. OPERATIONS PLATFORMS: May EXCLUSIVELY operate the crowdfunding website MANAGERS: May advise, advertise, trade, offer any other service The only limit for MANAGERS is the CONFLICT OF INTEREST ©2013 A.M. Lerro
  • 32. REGISTRATION REQUIREMENTS for Individuals and Company Directors: HONOURABLE PROFESSIONAL SHAREHOLDERS ✔ DIRECTORS ✔ ✔ MANAGERS ✔ ✔ ✔ no preventive measures, restrictions or punishment for certain crimes ✔ CONTROLLERS HONOURABLE PROFESSIONAL at least 2 years experience of management, finance, university teaching, auditing ©2013 A.M. Lerro
  • 33. To be registered with CONSOB NEW category of Exempted from most broker-dealers rules BROKER-DEALER Forbidden to keep money or securities of third parties ©2013 A.M. Lerro
  • 34. SMALL INVESTMENTS • Directly managed • MIFID exempted BIG INVESTMENTS • Partner with a BROKER-DEALER • Investment profile to match with proclivity to risk investment ©2013 A.M. Lerro
  • 35. SMALL INVESTMENTS: INDIVIDUAL: < 500€ per investment < 1000€ per year COMPANY: < 5.000€ per investment < 10.000€ per year ©2013 A.M. Lerro
  • 36. NATIONALITY: OWNERS: MANAGEMENT COMPANY: PLACE OF BUSINESS: Any nationality Any European in Italy ©2013 A.M. Lerro
  • 37. Italian OFFICE UK Company American Company Canadian Individual Chinese Individual ©2013 A.M. Lerro
  • 38. INVESTMENT PROPOSAL: A) How the platform operates B) Securities offered and their risks C) Specific features of each Campaign NO PROSPECTUS, but a lot of SPECIFIC INFO ©2013 A.M. Lerro
  • 39. SPOT ON THE RISKS: 1) Investment loss 2) Illiquidity 3) Temporary tax advantage 4) No dividends for a certain time ©2013 A.M. Lerro
  • 40. COMMUNICATION:      Max 4 pages (A4 size) Reasonable font size Common language Easy to understand Comparable proposals ©2013 A.M. Lerro
  • 41. CONSOB BROKER-DEALERS PLATFORM TARGET Co. INVESTORS ©2013 A.M. Lerro
  • 42. TARGET CO.: ONLY INNOVATIVE START UPs ARE ALLOWED TO RAISE EQUITY FROM THE CROWD (…for now) ©2013 A.M. Lerro
  • 43. REQUIREMENTS: INNOVATIVE START UP COMPANY Italian or European company The Holding may be wherever Main place of business and domicile in Italy Incorporated maximum 48 months before You can move the Target to Italy! Sales: less than € 5 Mill/year No dividends ever distributed Not resulting from M&A operations BUT The Target may buy a company or a business ©2013 A.M. Lerro
  • 44. Plus one of the following: RESEARCH & DEVELOPMENT • R&D expenses > 15% costs or sales (the bigger) EMPLOYEES • 1/3 PhD or graduated with research experience, or • 2/3 being graduated INTELLECTUAL PROPERTY • 1 patent, or • 1 microchip, or • 1 new vegetable, or • 1 registered software ©2013 A.M. Lerro
  • 45. PURPOSES of the Target: PURPOSE …BUT • Production, develop ment or commerce of innovative products or services having high technological value • A company may have wide purposes and pick up some of them from time to time ©2013 A.M. Lerro
  • 46. TAX EFFICIENCY is easily ACHIEVABLE, i.e.: TARGET HOLDING FOUNDERS CROWD VENTURE CAPITAL ©2013 A.M. Lerro
  • 47. TAX ADVANTAGES for INNOVATIVE START UPs: - Lower industrial cost for employment contracts - 24 months (instead of 12) of time to cover losses - Free access to a Government Guarantee for SME bank credit (up to 80% of €2,5M) INDIVIDUAL INVESTORS: CORPORATE INVESTORS: May deduct up to 25% of the investment May deduct up to 27% of the investment (€0,5M maximum) (€1,8M maximum) PROVIDED THAT YOU KEEP THE INVESTMENT FOR 2 YEARS ©2013 A.M. Lerro
  • 48. CROWDFUNDING CAMPAIGN BASICS: Project (team, technology, market, …) Specific risks of the Project Business Plan Due Diligence Basics Temporary tax advantages Withdrawal right ©2013 A.M. Lerro
  • 49. INVESTORS RELATIONSHIPS: Target Co.s may offer PREFERRED SHARES, with limited voting rights against advantages in the dividends distribution, in order to reduce costs and difficulties of investor relationships. ©2013 A.M. Lerro
  • 50. You can raise $ 6,700,000.00 per company, per year (€ 5.000.000) ©2013 A.M. Lerro
  • 51. INFORMATION TO BE PROVIDED: Terms and conditions Other simultaneous campaigns Any conflict of interest Applicable law and jurisdiction Available languages Broker-Dealer hired Where is the money Costs and investment fees Reimbursement terms Involvement of any professional investors ©2013 A.M. Lerro
  • 52. CERTIFIED BUSINESS INCUBATOR: REGISTRATION grants access to Government incentives Allowed to support Innovative START UPs in the launch of equity crowdfunding ©2013 A.M. Lerro
  • 53. “5% RULE”: 5% of the offered equity must be subscribed by a BANK, a PROFESSIONAL INVESTOR or a CERTIFIED INCUBATOR by the end of the campaign But there is no obligation to keep the shareholding for a minimum time ! ©2013 A.M. Lerro
  • 54. PROFESSIONAL INVESTORS for the purpose of 5% RULE: (1) which are required to be to operate in the financial markets: (a) Credit institutions and investment firms (c) Other authorised or regulated financial institutions (d) Insurance companies (e) Collective investment schemes and their management companies (f) Pension funds and management companies of such funds (g) Commodity and commodity derivatives dealers (h) Locals (i) Other institutional investors (2) meeting two of the following size requirements: — balance sheet total: EUR 20 000 000, — net turnover: EUR 40 000 000, — own funds: EUR 2 000 000. (3) Other in financial instruments. whose main activity is to invest ©2013 A.M. Lerro
  • 55. CONSOB BROKER-DEALERS PLATFORM TARGET Co. INVESTORS ©2013 A.M. Lerro
  • 56. INVESTORS: ITALIAN LAW PROVIDES A ROBUST LEGAL FRAMEWORK OFFERING PROTECTION TO INVESTORS ©2013 A.M. Lerro
  • 57. ASYMMETRIC INFORMATION: - The campaign owner does not want to share relevant information with the Crowd - The Crowd is not prepared to discuss specialistic issues - There are secrets ©2013 A.M. Lerro
  • 58. we have learned that: CONSOB has the supervision and is entitled to impose penalties Platforms ought to beregistered with CONSOB Platfoms ought to meet reputation and competence requirements Investment is subject to MIFID and operated through BROKER-DEALERS ©2013 A.M. Lerro
  • 59. There is NO PERSONAL INVESTMENT LIMIT MIFID regulates any NON SMALL investment ©2013 A.M. Lerro
  • 60. SMALL INVESTMENTS: INDIVIDUAL: < 500€ per investment < 1000€ per year COMPANY: < 5.000€ per investment < 10.000€ per year MIFID procedure requires BROKER-DEALERS to test the consumer’s proclivity to risk investments ©2013 A.M. Lerro
  • 61. INVESTORS EDUCATION: Companies must invest on education and offer it to potential investors. It helps with the asymmetric information problem. ©2013 A.M. Lerro
  • 62. INVESTORS confirm • that they understood the risks of equity investment INVESTORS confirm • that their personal estate will be not compromised It is NOT an Entrepreneur’s onus; NO particular formality required; NO third parties databases ©2013 A.M. Lerro
  • 63. SET OF WITHDRAWAL RIGHTS: WHO WHEN WHY RULE Retail Investors Bank Foundations Registered Incubators 7 days from the investment No reason or explanation: they just changed their mind §13.5 Reg. Consumers* 14 days from the investment No reason or explanation: they just changed their mind Consumer Code Retail Investors Bank Foundations Registered Incubators 7 days from the news, but before the campaign closed Material mistake or §25.2 Reg. something new happened, suitable to influence the investment decision * The only case where platform are allowed to withold costs ©2013 A.M. Lerro
  • 64. SHAREHOLDERS AGREEMENTS: INFORMATION RIGHT Any Shareholders Agreement must be notified to Investors TAG ALONG or WITHDRAWAL RIGHT* If the Founding Shareholders sell the business or anyhow wave control * Only for RETAIL INVESTOR As long as the Company enjoys Innovative Start Up status ©2013 A.M. Lerro
  • 65. SHARES MAY BE SOLD, but you lose tax incentives Opportunity to create a SECONDARY MARKET ©2013 A.M. Lerro
  • 66. Italy TAKE AWAY 6,7M$ max/year USA 1M$ max/year Any nationality US national only No investment limit per person 2K$ max per person Investors: self-attestation Free sale of the shares (or different wealth limit) Qualified investors? SALE: after 1 year (incentives to keep them) NO All or nothing All or nothing ©2013 A.M. Lerro
  • 67. LAWS AND MATERIALS: www.CrowdfundingInItaly.com ©2013 A.M. Lerro ©2013 A.M. Lerro
  • 68. WWW.LERRO.IT ROME Alessandro M. Lerro alessandrolerro alessandro@lerro.it