Name
Global FinTech Guide
Country _ Name
France
SectionTitle
Crowdfunding/crowdinvesting/crowdlending
Body
FinTechs belonging to this category operate crowdfunding, crowdinvesting and crowdlending platforms on which money is raised to invest in various projects, mainly start-up companies and real estate projects.

Crowdfunding is not a legal term, but often used as the general term for donation-based crowdfunding (the investor donates the money to the project), reward-based crowdfunding (the investor receives an often symbolic consideration for his investment), equity-based crowdfunding (crowdinvesting: the investor participates in the profits of the financed project or acquires shares or debt instruments) or lending-based crowdfunding (crowdlending: the investor is reimbursed at the end of the project with or without interest).

Introduction

Attitude of the country towards crowdfunding, crowdinvesting and crowdlending platforms

Crowdfunding is defined as 'the practice of funding a project or venture by raising money from a large number of people who each contribute with a relatively small amount, typically via the internet' while crowdlending and crowdinvesting are respectively defined as a means of funding through loans given by the public or through equity and debt. These new services offer less traditional funding solutions.

Indeed, in order to diversify funding mechanisms, the French legislator adopted many laws that aimed at helping the implementation of crowdfunding, crowdlending and crowdinvesting.

The first regulation, law n°2014-559, adopted on 30 March 2014, created numerous protection mechanisms that aimed at securing and protecting donors, which helped boost their trust in crowdfunding platforms. This eventually led to a growing recourse to such platforms by entities requiring funds for a specific project.

It is important to note that a label has been created and will be given to platforms that follow the law above and the decree that followed through, decree n° 2014-1053 adopted on 16 September 2014.

Moreover, another label has been created in 2017 by the Ministère de la transition écologique (The French ministry of ecological transition) in partnership with Financement Participatif France (French non-profit organisation which purpose is to the collective representation and the defence of the rights and interests of crowdfunding actors, and overall, of all the actors having an ancillary activity or supplemental or common interests with the crowdfunding) aimed at promoting crowdfunding platforms that fund 'green' projects. The label will guarantee the transparency and the ecological aspect of the project.

The authorities' response to the growing use of such platforms, specifically through the internet, showcases a friendly approach in regulation when it comes to crowdfunding and other crowd-oriented financial solutions.

This friendly approach to crowdfunding can be seen on the European level too. The European regulation 2020/1503 completed with the directive 2020/1504 relating to crowdfunding in the European Union (Regulation (EU) 2020/1503) created a unique status for crowdfunding service providers on the European market that came into force on 10 November 2021. According to article 12 of the said regulation, this unique status will provide a European passport to the registered providers giving them the opportunity to offer services outside of France on the European Union territory. The license or registration is given by the competent national authority (the list of registrations or licenses shall be reported to the European Market Supervision authority afterwards).

Legal affairs

Obligations and requirements to provide crowdfunding, crowdinvesting and crowdlending platforms described above

Crowdfunding platforms that only offer donations and free loans remain subject to the French regime.

Such crowdfunding service providers known as intermédiaire en financement participatif ('IFP') to categorize their services in accordance with article L.548-1 and article L.548-2 of the CMF that define the service as linking through the internet project initiators and project funders.

They are required by article L548-3 of the CMF to register as such with the Organisme Pour Le Registre Des Intermédiaires En Assurance ('ORIAS').

It is important to note that only corporations can register as IFPs. Other regulated entities, such as banks or payment services providers may also render those services incidentally. Crowdfunding service providers are subject to the main following requirements:

  • To work with integrity in their relationship with their clients, serving the client's best interests;
  • To implement prevention mechanisms against conflict of interests;
  • To comply with good behaviour rules;
  • To comply with anti-money laundering regulation;
  • To determine the object of the project, the amount required, the schedule and the figures of spending.
Crowdfunding service providers offering crowdfunding services for loans (crowdlending, excluding free loans) or securities (crowdequity) – the prestataires de services de financement participatif (“PSFP”) – are subject to Regulation 2020/1503 of 7 October 2020 on European crowdfunding service providers for business.

Ordinance no. 2021-1735 of December 22, 2021 modernizing the framework for crowdfunding, supplemented by Decree no. 2022-110 of February 1, 2022, adapts the French framework for crowdfunding in line with this regulation.

Since November 10, 2021, anyone wishing to develop a crowdfunding business within the scope of Regulation 2020/1503 must seek approval from the AMF before carrying on business issued within 3 months of submission of a complete application.

If the applicant's program of activity includes facilitating the granting of loans, the ACPR may contact the project owner directly, on behalf of the AMF, to ask further questions and set a deadline for response.

The six stages of the approval process:

  • Project presentation to the AMF (essential)
  • Submission of approval application
  • Checking that the application is complete, with the AMF involving the ACPR when the applicant's program of activity includes facilitating the granting of loans.
  • Examination of the application
  • Approval granted or denied
  • AMF decision, where applicable, after ACPR's assent if the applicant's program of operations includes loan facilitation.
The illegal exercise of this activity, without approval, is criminally reprehensible (Articles L. 573-12 et seq. of the CMF).

Additional comments regarding the legal situation for crowdfunding, crowdinvesting and crowdlending platforms or what FinTech’s must be aware of in this business area

Crowdfunding service providers registered as IFP are under the ACPR's supervision while those registered as PSFP are under the AMF's supervision.

Economic conditions

Market size for crowdfunding, crowdinvesting and crowdlending platforms and biggest companies in this business area

According to Financement Participatif France in their 2023 barometer of crowdfunding, since 2015, overall participatory financing has increased 12-fold, for a cumulative total of 9 billion euros.

After a record year in 2022, when crowdfunding peaked at over 2.3 billion euros raised, 2023 saw the first decline in this mode of financing: with 2,089 million euros raised, crowdfunding recorded a drop of 11.3%. Nevertheless, despite a turbulent economic and geopolitical context, crowdfunding results in 2023 remain above the 2 billion euro mark.

While real estate crowdfunding remains the driving force behind participative financing, it recorded a sharp decline (-28%), while continuing to account for the bulk of overall funds raised (55.6%).

Renewable energy crowdfunding grew by 11.5%, accounting for 17.6% of total funds raised.

With growth of 80%, crowd equity is becoming increasingly attractive.

Finally, the increase in the number of projects (+31%) confirms the strength of crowdfunding among the French.

Additional comments regarding the economic situation for crowdfunding, crowdinvesting and crowdlending platforms or what FinTech’s must be aware of in this business area

Crowdfunding seems to be in direct competition with other traditional financial institutions. While at first, crowdfunding was seen as a democratic alternative to traditional banking institutions, it lost some of its fervor across the years with a more and more adapted banking sector. However, this competition is not an obstacle to the growth of the sector as seen above.

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