Are there threats to crowdfunding and crowdsourcing?

The Federal Government announced a new bill on the Small Investors Protection Act on 28.07.2014. This provides in particular for requirements concerning prospectus obligations and investor information and accounting. Although the bill contains exceptions from its scope of application, which according to the reasoning of the draft are intended to privilege crowdfunding and crowdsourcing financings, amongst other things, criticism came immediately after publication from crowdfunding and crowdsourcing circles.

The exceptions in the bill were indeed welcomed insofar as forms of investment are not to be subject to prospectus obligations under the Vermögensanlagegesetz (which is to be amended by the bill), which have a total amount to be sourced per offeror of no more than 1 million euros and in which an individual investor can only acquire shares of no more than 10,000 euros.

However, criticism is directed, amongst other things, at the fact that crowdfunding models, which as a rule do not involve any investment by the participant at all but rather an option to purchase a product or other benefit, are referred to synonymously with crowdsourcing investment forms. Furthermore, the exceptions provided for are said to be insufficient, as despite the exemption from the prospectus obligation, whenever shares worth more than 250.00 euros are acquired, it is required that the individual investor receives a Vermögensanlagen-Informationsblatt (assets investment information sheet) to which he or she must then sign and return. This is seen as a relapse into the postal age.

However, this overlooks the fact that classic crowdfunding, in which no investment takes place at all but only a product purchase or benefit is promised, is already not covered by the law under the definition of 'Vermögensanlagen' (assets) according to the draft and therefore is subject to neither a prospectus obligation nor an information obligation.

Insofar as Vermögensanlagen (assets) are the subject of crowdsourcing, the question does indeed arise whether it is necessary to fulfil the requirements of the draft by printing out the information sheet and signing it by hand. Here the reasoning to the bill points out that the general rules of the BGB apply to the form of signature of the information sheet.

A signature is, however, explicitly mentioned in the latter only in the case of legally prescribed written form, so that it indeed appears reasonable to conclude that in both cases it must be a handwritten signature.

Explicitly the term 'written form' is, however, not mentioned in the bill. The question therefore arises whether, subsequently, a 'signature' in accordance with the legally regulated text form would not also suffice. This does not require a signature in the strict sense, but only that the declaration is embodied in some form (e.g. in an email), that the identity of the person making the declaration is stated, and that the conclusion of the declaration is made recognizable by reproduction of the signature or otherwise. Already in the case of written form not legally prescribed but only required by contract between the parties, a declaration (with 'signature') in accordance with text form is regarded by the case law as sufficient.

The fact that this form could be sufficient is also supported by the already applicable version of the Vermögensanlagegesetz, according to which the Vermögensanlagen-Informationsblatt (assets investment information sheet) is to be transmitted in text form as a rule only. It would therefore be consistent, and in the interest of electronic legal transactions, if printing out and handwriting a signature to the information sheet were not required, but only a declaration in text form, for example by entering the full name on a PDF form, which is then returned by email.

Conclusion

Even if not every criticism of the bill is justified, it would be desirable, in the final version at least to clarify that in the case of a crowdsourcing offer which falls under the said exception but in which shares worth more than 250.00 euros are acquired, the prescribed information sheet does not have to be signed in accordance with the legal written form but that a declaration in text form is sufficient.