michael.hirsch@hotmail.fr
Legal and Transactional
Implications of Reward-Based
Crowdfunding
Arnaud Burgot
Ulule.com, CEO
michael.hirsch@hotmail.fr
michael.hirsch@hotmail.fr
Ulule in a nutshell
Reward based crowdfunding, all or nothing model
Creative, innovative or charity projects
6 languages :...
Nature of
transactions on
reward-based
crowdfunding
plateforms?
Wording used on platforms
English (Kickstarter): to back / backer
Wording used on platforms
French (Ulule): contribuer / soutiens
Wording used on platforms
German (Startnext): jetzt unterstützen / supporter
Wording used on platforms
Spanish (Verkami): apoyar / mecenas
Crowdfunding babel tower
What are we really doing on those platforms:
Giving? Contributing? Backing? Donating?
Does any of...
Back to basics
Legal definition of a donation (=gift)
“Donation is the act by which the owner of a thing
voluntarily trans...
Back to basics
Legal definition of a « support » or of the act of
« backing »
> It does not exist
It’s not what it is called
On a strict legal point of view, transactions in reward
based crowdfunding are neither a suppor...
Simplify
« I want to do a game that will be astonishing. Be part
of it, participate to this exciting adventure. To thank
y...
Simplify…again
«Give me 20 € please to help me build a new game. In
exchange I will give a copy of it to you. »
Simplify…much more
« Give me 20 €, in exchange I give you a game »
(… as soon as it is available)
Back to basics
Legal definition of a sale
“A sales contract is an agreement between a buyer
and seller covering the sale a...
Back to basics
Legal elements necessary to trigger a sale:
1. capacity to contract
2. consent
3. something being sold
4. r...
Back to basics
> No need of a written agreement qualifying the
transaction as a sale – the existence of those legal
elemen...
Most transactions
on reward-based
crowdfunding
platformes are
simply…sales
Two very different point of
views
Psychological vision:
I help, I back, I support. I am happy to have the
reward, but it i...
Two very different point of
views
Legal vision:
Money vs Goods/Services = sale
…it is as old as the world…
No matter your ...
Ok, but I have read something…
Ok, but I have read something…
Kickstarter or Ulule are not stores. They do not sell
anything. Project creators do.
A crow...
A simple thruth
with important
consequences
Obligations of the project
creator
Obligation of mean or result?
Obligation of result
> The seller (i.e. project creator) must deliver the
rewards
Obligations of the project
creator
Civil responsibility
> If you do not deliver rewards, you have not fulfilled
your contractual obligations. You can be cond...
Criminal responsibility
If you do not deliver, maybe some people will consider
they have been swindled
> Fraud / misuse of...
Taxes
Sale = income
Taxes
Sale = income
• Company: Profit within your P&l statement >
company income tax
• Individual: Revenue to declare in y...
Taxes
Sale > sales taxe / VAT
In most western countries, a company must display
prices VAT included
Taxes
Sale > sales taxe / VAT
• Project creator subject to VAT (company) = 16 € for me
and 4 € in VAT to repay to State
• ...
Consequences: taxes
Sale > sales taxe / VAT
Can be much more complicated if the backer (=buyer)
is located abroad… applica...
Consequence: funding goal
Before launching your campaign assess applicability of
VAT / other taxes depending on your statu...
Better to
understand before
start of your
crowdfunding
campaign 
Legal & Transactional Implications of Rewards-Based Crowdfunding
Legal & Transactional Implications of Rewards-Based Crowdfunding
Upcoming SlideShare
Loading in …5
×

Legal & Transactional Implications of Rewards-Based Crowdfunding

1,090 views
924 views

Published on

Reward based crowdfunding raises questions about nature of transaction being performed thanks to crowdfunding platforms. Is it a donation, a sale, a co-production, something else? Understanding this point is key to determine the nature of project creators obligations, their responsibilities and also potential taxation of cash collected. Based on basic examples, get a view on those legal aspects which are very important to understand properly reward based crowdfunding implications.

By Arnaud Burgo, Ulule. Presented at Crowdsourcing Week Brussels 2014. More info: http://crowdsourcingweek.com/

Published in: Business, Economy & Finance
0 Comments
0 Likes
Statistics
Notes
  • Be the first to comment

  • Be the first to like this

No Downloads
Views
Total views
1,090
On SlideShare
0
From Embeds
0
Number of Embeds
23
Actions
Shares
0
Downloads
17
Comments
0
Likes
0
Embeds 0
No embeds

No notes for slide

Legal & Transactional Implications of Rewards-Based Crowdfunding

  1. 1. michael.hirsch@hotmail.fr Legal and Transactional Implications of Reward-Based Crowdfunding Arnaud Burgot Ulule.com, CEO
  2. 2. michael.hirsch@hotmail.fr
  3. 3. michael.hirsch@hotmail.fr
  4. 4. Ulule in a nutshell Reward based crowdfunding, all or nothing model Creative, innovative or charity projects 6 languages : FR, GB, IT, ES, ALL, PORT Biggest european reward based crowdfunding platform: • Projects financed 5 k • Collected funds 16.6 m€ • Members 425 k • Success rate 67%
  5. 5. Nature of transactions on reward-based crowdfunding plateforms?
  6. 6. Wording used on platforms English (Kickstarter): to back / backer
  7. 7. Wording used on platforms French (Ulule): contribuer / soutiens
  8. 8. Wording used on platforms German (Startnext): jetzt unterstützen / supporter
  9. 9. Wording used on platforms Spanish (Verkami): apoyar / mecenas
  10. 10. Crowdfunding babel tower What are we really doing on those platforms: Giving? Contributing? Backing? Donating? Does any of this wording make sense on a legal point of view?
  11. 11. Back to basics Legal definition of a donation (=gift) “Donation is the act by which the owner of a thing voluntarily transfers the title and possession of the same from himself to another person, without any consideration; a gift.”
  12. 12. Back to basics Legal definition of a « support » or of the act of « backing » > It does not exist
  13. 13. It’s not what it is called On a strict legal point of view, transactions in reward based crowdfunding are neither a support, a backing, a gift, or a donation > So what is it?
  14. 14. Simplify « I want to do a game that will be astonishing. Be part of it, participate to this exciting adventure. To thank you I will give you a copy of the game, as soon as I will have finished it. »
  15. 15. Simplify…again «Give me 20 € please to help me build a new game. In exchange I will give a copy of it to you. »
  16. 16. Simplify…much more « Give me 20 €, in exchange I give you a game » (… as soon as it is available)
  17. 17. Back to basics Legal definition of a sale “A sales contract is an agreement between a buyer and seller covering the sale and delivery of goods, securities, and other personal property.
  18. 18. Back to basics Legal elements necessary to trigger a sale: 1. capacity to contract 2. consent 3. something being sold 4. reason (must be licit) 5. price
  19. 19. Back to basics > No need of a written agreement qualifying the transaction as a sale – the existence of those legal elements automatically qualify the transaction as a sale
  20. 20. Most transactions on reward-based crowdfunding platformes are simply…sales
  21. 21. Two very different point of views Psychological vision: I help, I back, I support. I am happy to have the reward, but it is only one of my motivations to contribute
  22. 22. Two very different point of views Legal vision: Money vs Goods/Services = sale …it is as old as the world… No matter your motivations
  23. 23. Ok, but I have read something…
  24. 24. Ok, but I have read something… Kickstarter or Ulule are not stores. They do not sell anything. Project creators do. A crowdfunding platform just facilitates. Technically, it is comparable to a marketplace.
  25. 25. A simple thruth with important consequences
  26. 26. Obligations of the project creator Obligation of mean or result?
  27. 27. Obligation of result > The seller (i.e. project creator) must deliver the rewards Obligations of the project creator
  28. 28. Civil responsibility > If you do not deliver rewards, you have not fulfilled your contractual obligations. You can be condemned by a court to pay compensation for damages. Responsibility of the project creator
  29. 29. Criminal responsibility If you do not deliver, maybe some people will consider they have been swindled > Fraud / misuse of funds / breach of trust… potential criminal responsibility Responsibility of the project creator
  30. 30. Taxes Sale = income
  31. 31. Taxes Sale = income • Company: Profit within your P&l statement > company income tax • Individual: Revenue to declare in your personal income > personnal income tax (and possible social charges)
  32. 32. Taxes Sale > sales taxe / VAT In most western countries, a company must display prices VAT included
  33. 33. Taxes Sale > sales taxe / VAT • Project creator subject to VAT (company) = 16 € for me and 4 € in VAT to repay to State • Project creator not subject to VAT (individual) = 20 € for me (but I will certainly pay lots of personnal income tax)
  34. 34. Consequences: taxes Sale > sales taxe / VAT Can be much more complicated if the backer (=buyer) is located abroad… applicability of VAT depending on territoriality rules > For big projects might be useful to consult an accountant
  35. 35. Consequence: funding goal Before launching your campaign assess applicability of VAT / other taxes depending on your status & project >If you are subject to VAT, your funding goal must include: funds to make the project + cost of rewards production + cost of rewards shipping + platform commission + ~20% of VAT to repay to State!
  36. 36. Better to understand before start of your crowdfunding campaign 

×