knowledge 28 May 2024 |

Ireland as a Location for Crowdfunding Service Providers 2024

Why Firms Choose to Become Authorised as a Crowdfunding Service Provider in Ireland:

Ireland is home to a substantial number of financial services firms, some home grown and others drawn to Ireland by its active and thriving financial services sector. 

There are a number of advantages to operating in Ireland as a regulated financial service provider, such as a crowdfunding service provider, including:

• a strong regulatory framework with a credible and experienced regulator, the Central Bank of Ireland;
• the ability for fintech firms to engage with the Central Bank of Ireland through its Innovation Hub;
• the ability to passport authorisation as a crowdfunding service provider to other European Economic Area (“EEA”) jurisdictions, meaning that authorisation in Ireland can be the launch-pad for access to the wider European market; 
• a favourable tax regime, due to a combination of a 12.5% corporate tax rate and an exceptionally extensive and comprehensive set of double tax agreements; and
• access to a sophisticated financial services ecosystem with a deep pool of staff, managers, professional advisers and service providers including not only native English speakers but a sizeable international population.

Authorisation Requirement: 

A person who meets the definition of a crowdfunding service provider is required to obtain authorisation from the Central Bank of Ireland in order to provide these services.

Under the applicable legislation (Regulation (EU) 2020/1503),¹  a ‘crowdfunding service provider’ means a legal person who provides crowdfunding services.²

‘Crowdfunding services’ in turn mean: 

“the matching of business funding interests of investors and project owners through the use of a crowdfunding platform and which consists of any of the following activities: (i) the facilitation of granting of loans; (ii) the placing without a firm commitment basis…transferable securities and admitted instruments for crowdfunding purposes issued by project owners or a special purpose vehicle, and the reception and transmission of client orders…in relation to those transferable securities and admitted instruments for crowdfunding purposes”.³

A ‘crowdfunding platform’ means a publicly accessible internet-based information system operated or managed by a crowdfunding service provider.⁴

Regulation (EU) 2020/1503 provides for a uniform set of requirements for:

• the provision of crowdfunding services;
• the organisation, authorisation and supervision of crowdfunding service providers;
• the operation of crowdfunding platforms; and
• transparency and marketing communications in relation to the provision of crowdfunding services in the EU.

It should be noted however that the crowdfunding regime has certain limitations. If, in the course of providing crowdfunding services, a crowdfunding offer (calculated over 12 months on a per-project owner basis) has a total consideration in excess of € 5 million,⁵ that particular offer will be out-of-scope and will instead be subject to the rules set out in MiFID II (Directive 2014/65/EU) and the Prospectus Regulation (Regulation (EU) 2017/1129).

Authorisation Process:

When Regulation (EU) 2020/1503 entered into force, the Central Bank of Ireland was made the responsible authority for authorising and supervising crowdfunding service providers in Ireland. Initially a transitional authorisation process applied for certain entities operating prior to the introduction of the regulatory regime. However, this transitional period expired on 10 November 2023. 

Before applying for authorisation as crowdfunding service provider, a firm should establish that the services it is proposing to offer mean that it is required to hold authorisation as a crowdfunding service provider and that it can meet the authorisation requirements pursuant to Regulation (EU) 2020/1503, can comply with the Central Bank of Ireland’s requirements and any other relevant financial services law and is capable of complying with, and adhering to, the supervisory requirements that must be satisfied on an ongoing basis.

The authorisation process requires an applicant to complete:

• An Application Form for Authorisation as a crowdfunding service provider (including all the specific information and documentation requested therein), including the applicant’s business plan and programme of operations); and
• Fitness and Probity Individual Questionnaires (sometimes called ‘IQs’) for all relevant individuals proposed to hold Pre-Approval Controlled Function roles.

Where an applicant proposes to operate on a cross border (freedom of services) basis within the EEA, it should also submit the following information to the Central Bank of Ireland:

• A list of the EEA member states in which the applicant intends to provide crowdfunding services;
• The identity of the natural and legal persons responsible for the provision of the crowdfunding services in those member states;
• The starting date of the intended provision of the crowdfunding services by the applicant; and
• A list of any other activities provided by the applicant not covered by Regulation (EU) 2020/1503.

The authorisation process is as follows:

Stage	Details
Stage 1: Preliminary Meeting	An applicant should first request a preliminary meeting with the Central Bank of Ireland to discuss the application. The applicant is required submit a short presentation and a list of attendees five business days in advance of the preliminary meeting. In our experience the presentation should be reasonably high level and include, where relevant, the following: High level background information on the applicant (and group where applicable) e.g. business line and history; Rationale for selecting Ireland as European place of business; Proposed business lines (new) and current track record (if existing firm); Description of the services/activities  to be provided; Staffing and governance proposals; Details of any proposed outsourcing arrangements; Revenue and regulatory capital projections; and Any other information that the applicant considers pertinent.
Stage 2: Submission and Completeness Check of Application Form and Individual Questionnaires	Following submission of the application form, fully completed Individual Questionnaires for each person who will hold a PCF role must be submitted. The Central Bank of Ireland will acknowledge receipt of the application form within ten working days of its receipt. Within 25 working days of the receipt of the application form, the Central Bank of Ireland will assess whether the application is complete i.e. whether the application contains all the required information and documentation. If all required information and documentation has not been provided, the Central Bank of Ireland will identify the missing information and set a deadline for the applicant to provide the missing information. Once all required information is submitted, the application will be deemed complete. Where the application is deemed complete, the applicant will be notified. The Central Bank of Ireland will then complete an assessment of the application and may issue detailed comments and/or seek additional information.
Stage 3 – Assessment of the Application	The onus is on the applicant to ensure all information in the application form and Individual Questionnaires and all supporting information submitted meet the relevant requirements. The board of directors of the applicant must provide an attestation on the headed paper of the applicant and signed by two directors of the applicant confirming certain matters on behalf of the applicant.
Stage 4 – Decision on Authorisation	The Central Bank of Ireland will make a determination on the application within three months of receipt of a complete application. Successful applicants are issued with a letter of authorisation from the Central Bank of Ireland setting out their authorisation requirements and any conditions of authorisation applicable.

McCann FitzGerald LLP is a premier law firm in Ireland and advises on the full range of legal, tax and compliance activities undertaken by crowdfunding service providers in Ireland. We have experience in guiding applicants through the crowdfunding service provider authorisation process. If you are considering becoming authorised as a crowdfunding service provider in Ireland, please contact us for further information as to how we can help.