Govt Has No Plans To Introduce Legislation To Regulate Crowdfunding

The central government has no proposal to introduce legislation in regulating crowdfunding fundraising, as per Rao Inderjit Singh, Minister of State for Corporate Affairs. 

“There is no such proposal with the Ministry of Corporate Affairs,” Singh informed the Lok Sabha on Monday.

The minister further clarified that, ‘Crowdfunding’ is not defined under the provisions of the Companies Act, 2013. He said this while answering on whether fund raising of private, non-listed companies through crowd funding medium is a prevalent practice and allowed in India.

Hence, the government does not have information on a record of the total financing conducted through such a route for private, non-listed companies in India.

While the Indian startup ecosystem has grown immensely in the last couple of years,  crowdfunding has remained as one of the less popular options for funding. In many cases, retail investors in search of alternative investment options, assemble on a platform, skim through the business model, and invest in the startup of their choice. 

There are different types of crowdfunding such as peer-to-peer lending, reward based, donation-based. However, equity crowdfunding’s legality in India is questionable. 

Indiegogo, SeedInvest Technology, Mightycause, StartEngine, GoFundMe, Patreon, GripInvest, ImpactGuru are some of the known crowdfunding platforms for startups. 

According to a Satistia report, the crowdfunding market size in India is expected to be at $6.91 Mn in 2022. It is projected to reach $6.42 Mn at an annual growth rate (CAGR 2022-2027) of -1.46% . The average funding per campaign in the Crowdfunding segment amounts to $4.52K in 2022.

Last year during Covid19, a group of startup founders called Gurgaon Entrepreneurs launched a crowdfunding campaign with the goal of procuring oxygen concentrators. The group collected INR 3 Cr to source concentrators from China.