The Securities and Exchange Commission (SEC) has issued regulations on debt crowdfunding through funding portals, aiming to increase alternative fundraising methods for small and medium-sized enterprises (SMEs) and startups.
Crowdfunding is a method of raising funds from investors through a funding portal on the internet. It provides another channel for SMEs and startups to access capital.
The debt crowdfunding regulations came into force on May 16 after focus groups and public consultation sessions were held on Jan 28.
"Debt crowdfunding rules are part of the SEC's regulatory efforts to support government policy on promoting greater access to alternative financing resources for SMEs and startups to raise funds and expand business growth," said SEC assistant secretary-general Praoporn Senanarong.
The new scheme follows a similar regulatory framework to the one governing existing equity crowdfunding rules, Mrs Praoporn said.
Pursuant to the new regulations, an eligible fundraiser for crowdfunding must be a Thai company with a clear business plan.
An SME or a startup may raise capital from retail investors at a maximum amount of 20 million baht during the first 12 months, and up to 40 million baht in total, for equity and debt combined, throughout the whole project.
The fundraiser is also required to report the offering results to the SEC.
The new crowdfunding regulations prescribe an investment limit of 100,000 baht per business, equity and debt combined, to manage risk and the potential impact on investors.
The annual investment limit is capped at 1 million baht for each retail investor, while there is no investment limit for non-retail investors such as institutional investors, venture capital businesses, private equity trusts and qualified investors.
Crowdfunding must be conducted through a funding portal approved by the SEC. Funding portals play a pivotal role in screening eligible companies and overseeing their information disclosure.
The SEC does not grant approval for each crowdfunding project or supervise pre-offering disclosures.
To be eligible for funding portal approval, an applicant must have the same qualifications and work systems required for equity crowdfunding and must have a system for assessing creditworthiness and the risks of the debt fundraisers.
The SEC also amended the overall crowdfunding requirements to make them consistent with other regulations. This includes revisions to the definitions of private equity trusts and venture capital businesses in line with the digital token offering rules, as well as amendments to the rules governing equity trading in the secondary market in line with the primary market offering rules.
Investors are advised to study the crowdfunding rules before making an investment decision, as users of crowdfunding are generally SMEs and small startups. Investors should consider exposure to business risks and obligations of the offered debts, trading channels and transfer limits.