Uche Usim, Abuja
To further deepen the nation’s capital market and enable it provide development capital for small and medium enterprises, Nigeria’s Securities and Exchange Commission (SEC), at the weekend unveiled an exposure draft for its regulatory framework for crowdfunding in the country.
It has also pegged the paid up capital for medium-sized enterprises at N100 million, while that of small outfits stands at N70 million and N50 million for the micro enterprises. It however noted that the limits set forth above shall not apply to MSMEs operating as digital commodities investment platforms or such other MSMEs as may be designated by the Commission from time to time.
The draft, when approved, proposes conditions under which private companies are permitted, “with the required structure and mechanism in place” to raise capital from the public through a process called Crowdfunding. It defines Crowdfunding as “the process of raising funds to finance a project or business from the public through an online platform,” which could be a “website, portal, intermediary portal, application, or other similar modules that facilitate interaction between fundraisers and the investing public.”
The funding occurs within a period known as funding round, “within which a specific project, business, or venture is hosted on a crowdfunding platform to raise funds from a large number of people in exchange for shares, debt securities or other investment instruments approved by the commission. The funds may either be pooled from high net worth investors, or a large number of people through an online platform in exchange for any investment instruments approved by the Commission, which also be plain vanilla bonds or debentures, and simple contracts.
According to SEC total fees payable to parties to a crowdfunding issue shall not exceed two per cent of the total funds raised.
For the purpose of calculating the aggregate amount of securities and investment instruments offered and sold by an issuer under this Rule and determining whether an issuer has previously sold securities or investment instruments within a 12-month period, according to the SEC, “the term issuer as used in this Rule, shall include all entities controlled by or under common control with the issuer and any predecessors of the issuer.”