The Republic of Kenya, through one of its regulatory agencies, the Capital Markets Authority (CMA), is in the process of regularising crowdfunding through the draft Capital Markets (Investment Based Crowdfunding) Regulations, 2021. The regulation is timely if well-thought-out.
There has been a grey area concerning whether corporate crowdfunding by a private limited company resulted in a model of soliciting funds beyond the scope of a private placement, which turns the status of a corporate entity from a private limited company to a public limited company. The Capital Markets Act and Capital Markets (Securities) (Public Offers, Listing and Disclosures) Regulations, 2002 provide more regulatory aspects of a private placement.
The activities that go on during crowdfunding result in interacting with various areas of law; hence, the need to look into how the regulation is going to affect crowdfunding activities – the implication not only affects the businesses but also how Software as a Service (SaaS) or Platform as a Service (PaaS) will be developed. In that regard, we share our Q&A, subject to our terms and conditions, on the draft Capital Markets (Investment Based Crowdfunding) Regulations, 2021.