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France allows startups to raise $1.4M in crowdfunding, syndicate campaigns

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(Credit: Reuters) The French flag flies over the courtyard of the Elysee Palace in Paris December 4, 2012.
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February 14
10:57 PM 2014

France has gotten cozier with startups as it increases crowdfunding limits for young companies looking to raise capital, TechCrunch reported. The government said startups can raise as much as $1.4 million or €1 million for every Kickstarter-like crowdfunding initiative. Those firms trying to get capital through equity crowdfunding campaigns or AngelList-style syndicates will also be limited to the same amount annually. They don't have to inform the financial markets regulator if they will stay within these limits.

Before the new rules were announced French startups could only raise up to $140,000 or €100,000 through equity crowdfunding. Moreover, the company could not be an SAS or the French counterpart of an LLC. If the firm secured over $140,000, the services of a lawyer had to be engaged to comply with lengthy legal documents. Under the new rules, if the startup raised less than $1.4 million through equity crowdfunding, only a short document of anywhere from 3 to 4 pages will need to be filed, the report said.

The new law has long been awaited by investors for the past few months. The government presented a law in September raising the limit to $410,000 or €300,000. It was still too low that the government had to start all over again, the report said.

Some restrictions have still been put in place, though, under the new rules. One is that under Kickstarter-style crowdfunding, individual investors will not be able to invest over $1,400 or €1,000, limiting the disappointment that comes with overpromising fundraising campaigns. This covers French crowdfunding platforms like Ulule, KissKissBankBank and My Major Company, the report said.

The crowdfunding rules were a joint effort of banks, regulators and consumer associations. However, this is just a start. The law will first need to be passed sometime in June. After that, the main players in the crowdfunding space will meet to determine if the new limits will need to be increased or decreased. A new crowdfunding official will also be nominated by the government, the report said.

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