MSC Article
Crowdfunding in Thailand
What is Crowdfunding?
Crowdfunding is a method of fundraising by collecting small amounts of money from a large number of people through funding portals or online platforms. It provides an alternative financing option for SMEs and startups to access capital without relying solely on traditional financial institutions such as banks or venture capital firms.
Types of Crowdfunding
There are several types of crowdfunding, which can generally be categorized into 4 main models as follows:
- Donation-based Crowdfunding: Supporters donate money without expecting any financial return typically used for charitable causes, social initiatives, or public benefit activities.
- Reward-based Crowdfunding: Supporters receive a non-financial reward, such as a product sample, event ticket, or exclusive access, in exchange for their contribution.
- Peer-to-Peer Lending or P2P Lending: Investors lend money to businesses or individuals and earn interest or repayment of the principal plus interest based on agreed terms. This form of crowdfunding is regulated by the Bank of Thailand.
- Equity-based Crowdfunding: Investors receive equity or ownership rights in the company. This form of crowdfunding is regulated under securities laws as it involves the sale of securities.
Equity-based Crowdfunding, which involves offering shares or debt securities to investors in exchange for funding, is considered a public offering of securities and is therefore subject to the Securities and Exchange Act B.E. 2535 (1992) and regulated by the Securities and Exchange Commission of Thailand (the “SEC”). The SEC requires that all securities offerings through crowdfunding must be conducted via an approved funding portal (the “Funding Portal”), which acts as an intermediary between a company intending to raise funds through crowdfunding (the “Issuer”) and investors.
The Funding Portal is responsible for screening and verifying the qualifications of the issuers before their securities can be offered to the public. Currently, the SEC has approved the following 4 Funding Portals: Siam Validus Capital Co., Ltd. FS Siam Co., Ltd. Investree (Thailand) Co., Ltd. Ruamjai Thai Soo Co., Ltd. (For more information, please refer to the SEC’s official List of Funding Portals approved by the SEC.)
Crowdfunding Process
1. Proposal Submission
The Issuer submits a business or project plan to the Funding Portal, which reviews and evaluates the Issuer’s qualifications and the viability of the plan.
2. Disclosure to Investors
The Funding Portal discloses key information about the Issuer and the offered securities on the Funding Portal’s website to helps investors make informed decisions.
3. Fundraising Period
- The fundraising period usually lasts 1–3 months. Investors may cancel their subscription during this period within the specified time.
- Investors pay for their subscriptions and deposit the funds with a third party, such as an Escrow Agent. In the event that the fundraising goal is achieved, the Escrow Agent releases the funds to the Issuer. If the fundraising goal is not achieved, the funds will be returned to investors.
In the case of equity crowdfunding, if the fundraising goal is not achieved, the fundraising project is canceled, and all funds are returned to investors. (All-or-Nothing). For debt crowdfunding, the offering is considered successful if at least 80 percent of the goal is raised. The Funding Portal must inform investors of this condition in advance.
4. Post-Fundraising Actions
If the fundraising is successful, the Issuer will receive the funds to proceed with the business or project plan. The Issuer will issue the securities (shares or bonds) and will also require to provide regular updates on progress to the investors.
Qualifications of Issuers for Raising Funds through Crowdfunding
1. The Issuer must be a limited company or a public limited company established under Thai law and must meet the following criteria:
- Operates a clearly defined business or project and intends to use the funds raised through crowdfunding for business operations or to refinance loans incurred for such purposes.
- Does not have shares listed as securities on the Stock Exchange of Thailand (SET).
2. In the case where the Issuer is a holding company and does not operate any significant business, the holding company can raise funds through crowdfunding if the holding company holds more than 50 percent of shares in a company with a business or project that requires funding, and the company being held must meet the criteria in Item 1.
The Notification of the Capital Market Supervisory Board No. Tor. Chor. 21/2562 Re: The Determination regarding the Offering of Securities through Crowdfunding serves as the key legislation governing crowdfunding in Thailand. there are also other relevant laws and regulations that may apply, further information, please refer to the official website of the SEC or consult with a qualified legal or financial advisor.
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