Open a Crowdfunding Company in Estonia

Equity crowdfunding represents a system through which a large group of investors is able to fund start-up and small companies in exchange for equity. The investors inject capital into a business and in return, they get to own shares in that company. And when the business succeeds, the value of the shares in that business increases, as well. 

Below, our company registration specialists in Estonia explain the requirements related to establishing a crowdfunding business in this country. You can rely on us for every step of the procedure for setting up your own Estonian crowdfunding company.

The principles of crowdfunding in Estonia

Crowdfunding is one of the simplest ways of raising capital for a business or an idea with the help of outside investors, friends, or even companies interested in investing in the business venture. Crowdfunding is an alternative means of obtaining financing apart from the traditional ones, including loans.

In Estonia, crowdfunding has become very popular thanks to the fact that the government invested a lot in innovation and thus created many opportunities for young investors coming up with innovative solutions.

Those who want to open crowdfunding companies in Estonia will benefit from an open market, a clean and clear regulatory framework for company formation and an easy incorporation procedure.

The crowdfunding market in Estonia

Estonia is one of the most advanced countries in Europe and in the world when it comes to technology and crowdfunding. The latter developed a lot in the last 5 years, however, crowdfunding was present in Estonia for many years under different forms. The first crowdfunding platform was established in 2009, which is why Estonia is considered a pioneer among European and EU countries from this point of view.

At the level of 2018, Estonia ranked among the top 10 European country in terms of alternative finance with a volume of 31,5 million euros.

The most popular model of alternative financing in Estonia is given by lending crowdfunding platforms.

If you want to open a company in Estonia in the field of crowdfunding, the regulations to comply with are not very stringent, however, you will be required to comply with several practices and respect the guidelines imposed by the local authorities.

Choosing the right type of entity for a crowdfunding business in Estonia

The most appropriate type of structure for creating an Estonian crowdfunding company is the limited liability company.

If you decide to set up a such a business venture in Estonia, you should know the following:

1. there are no restrictions to foreign ownership when setting up a crowdfunding company through an LLC;
2. the minimum share capital for registering such a company is 7,500 euros which must be submitted upon registration;
3. the company can have a single shareholder who can be a foreign citizen (e-residency is permitted in Estonia);
4. the company must have a registered address in Estonia and at least one director;
5. there are no special licensing requirements for the creation of certain crowdfunding platforms.

Our Estonian company formation specialists can handle the incorporation of the chosen business form when creating a crowdfunding platform here.

 

Investors who intend to open a crowdfunding platform in Estonia have to register the company first in the country. Our Estonian company formation agents can help with the entire registration procedure of a business here.

 

The steps required when an investor wants to open a company in Estonia are:

 

• choosing a name for the company;

• verifying the availability of the business name;

• registering the business at the Commercial Register;

• registering the business as a VAT payer;

• registering all the employees at the Employee Registry.

 

If you decide to open a crowdfunding company in Estonia and need guidance, you can rely on our representatives for full support with the preparation of the documents.

 

Types of crowdfunding platforms in Estonia

There are several types of platforms which can be administered an Estonian crowdfunding company. These are:

• - equity-based crowdfunding platforms;
• - lending crowdfunding platforms which are further divided into peer-to-peer consumer and business lending;
• - invoice trading platforms;
• - real estate crowdfunding platforms.

We mentioned above about the special licensing procedure of certain crowdfunding platforms. In the case of lending crowdfunding companies in Estonia, the Creditors and Credit Intermediaries Act provides for the intermediaries to have a professional license in order to offer credits to consumers. This is because, such platforms operate like any other financial institutions in Estonia.

 

When it comes to the crowdfunding market in Estonia, our company formation consultants in Estonia would like to note that this segment is not regulated by laws in this country.

 

The crowdfunding scene in Estonia is generally regulated by a good practices guide, generated by the FinanceEstonia crowdfunding task-force.

 

The platforms which have adhered to these guidelines are more open, safer and more transparent. The regulated platforms are those which are dealing with loans, which require a special permit from the financial inspection.

 

EU regulations imposed on Estonian crowdfunding companies

As an EU member state, Estonia is legally bound to respect the regulations applicable at the level of the Union. Those who want to set up crowdfunding companies here must also respect the guidelines imposed under the EU regulations and which often refer to lending-based platforms.

Under Article 4(11) of Directive (EU) 2015/2366, an Estonian crowdfunding platform is registered as a payment service provider.

According to the EU regulations, those who will offer financing through a crowdfunding company (the creditors) must pass a financial literacy test and must also have sufficient knowledge and experience in the financial field when establishing such a platform.

The platform owner must also advise the creditors about the risks associated with their investments. In this sense, the Estonian company will issue a prospectus which will be verified by the Financial Supervisory Authority.

Investors who want to open a crowdfunding company in Estonia should consider different aspects, such as:

 

 

If you are interested in setting up an Estonian crowdfunding business and you need help, please speak to our company formation advisors in Estonia.