According to the BSE’s proposal the new platform would serve as a private investment opportunity for up to a maximum of 150 investors per investment round (tender), possibly on a first come first served basis. Candidate companies seeking alternative financing would need to register and enter into an agreement with BSE. Information regarding the candidate’s business would be available for potential investors either through a standardized due diligence process where auditors or investment service providers selected by the BSE would conduct and publish the result of their due diligence exercise or through information provided by the candidates themselves. The BSE then would invite potential investors who have previously registered on the BSE platform to invest, setting a time limit for the tenders. Investors who signed a letter of intent expressing their serious intent to participate in the investment would be able to access an information memorandum about the issuer company and possibly to an information data room as well. At the option of the issuer, transactions could be concluded as a result of either one-to-one negotiations or an auction process (this latter for an additional charge). Transactions concluded via successful tenders would qualify as non-exchange transactions, i.e. an over the counter deal.
The BSE expressed its commitment that, in order to break down financial barriers, they intend to keep fees as low as possible. They anticipate a fee structure where, apart from certain fixed fees payable for the various selected services, a success fee would be charged based on the number and value of successful transactions.
The BSE’s initiative follows capital market trends in the US where similar crowd financing opportunities have been introduced by the JOBS Act (Jumpstart Our Business Start-ups Act) allowing retail and non-accredited investors to enter the market. This trend can also be traced in the European Union financial regulations. In September 2015, following the MiFid Directive’s introduction of multilateral trading platforms and various consultations aiming to revitalize the economy and diversify financing sources, the European Commission published an action plan to “boost business funding and investment financing” through the establishment of the Capital Markets Union. This is as a medium term project and facilitating the life of SMEs and start-ups is central to the plan.
The new platform remains only a concept but the BSE aims to proceed with further specific measures to launch the platform in the first half of 2016. If you would like more information, please contact us.