Algeria recently unveiled a comprehensive set of regulations for crowdfunding, marking a significant milestone in the country’s burgeoning startup ecosystem. These new regulations are poised to enable startups to raise substantial capital, with some key provisions and requirements for both commercial companies and participatory investment advisors.
- Headquarters in Algeria: Commercial companies looking to utilize crowdfunding must maintain their headquarters in Algeria.
- Director Criteria: They should ensure that all their directors meet the integrity and qualification criteria specified by the commission for directors of IOBs (commercial companies).
- Activity Manager: Appoint an activity manager with a higher education degree in economic or financial fields, who has successfully completed specialized training provided by an accredited organization in collaboration with the commission.
- IT Resources: Possess the necessary material and IT resources.
- Operational Procedures: Establish operational procedures that ensure traceability of transactions, identification, and management of conflicts of interest, and the detection of money laundering and terrorist financing activities.
- Internal Control System: Implement an internal control and compliance system tailored to their business volume.
Participatory Investment Advisors:
- Shariah Conformity: Advisors seeking to establish a platform exclusively dedicated to Islamic participatory financing must obtain a Shariah conformity certificate from the national Shariah authority for Islamic finance.
- Advisory Services Authorization: IOBs interested in obtaining the status of Crowdfunding Investment Platform (CIP) must first receive authorization to engage in advisory services for transferable securities placement and placement of transferable securities and financial products.
- Qualified Individual: IOBs and SGFIs intending to engage in CIP activities must designate a qualified individual responsible for the activity who meets the criteria specified in the regulations.
- Insurance Requirement: CIPs are required to maintain professional liability insurance covering all risks associated with their activities.
- Application Process: Approval applications for CIP status must be submitted to the commission, accompanied by specified documents. The commission reviews these applications within one month, with additional information requests pausing the timeline.
- Non-Transferable Approval: CIP approval is non-transferable and issued to specific individuals.
Suspension and Withdrawal of Approval:
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The commission can suspend or withdraw approval under certain circumstances, including non-compliance with approval conditions or actions that may harm participant interests.
CIP Requirements:
CIPs must adhere to specific rules, including proposing projects with a total amount not exceeding 20 million Dinar (USD147,000) for a twelve-month period, conducting suitability tests on participants, offering multiple projects that meet common investment criteria, and publishing relevant information about projects.
Crowdfunding Projects:
Participatory investment projects are exempt from submitting an information notice to the commission. Instead, the CIP must publish an information document on the platform for each project, including project details and specific requirements set by the commission.
Due Diligence:
CIPs must establish a due diligence system to select viable participatory investment projects. Participant files must be maintained for a minimum of five years, with the protection and confidentiality of personal data being paramount.
Subscription and Fundraising:
CIPs are responsible for providing investment advice and collecting subscription forms for projects. They must establish dedicated current accounts for each project.
Reimbursement and Remuneration:
CIPs must reimburse participants if a project or project stage is not fully subscribed within the prescribed timeframe. Remuneration is based on various factors, including services provided to project leaders and subscriptions for securities.
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Control and Reporting:
The CIP is subject to control by the commission, which may conduct investigations and request financial statements and other information for monitoring activities.
These regulations aim to create a conducive environment for crowdfunding in Algeria, empowering startups to access much-needed capital while ensuring the integrity and security of the crowdfunding process. Published in the Official Journal of Algeria, these regulations mark a significant step forward for the country’s entrepreneurial ecosystem.
Charles Rapulu Udoh
Charles Rapulu Udoh is a Lagos-based lawyer, who has several years of experience working in Africa’s burgeoning tech startup industry. He has closed multi-million dollar deals bordering on venture capital, private equity, intellectual property (trademark, patent or design, etc.), mergers and acquisitions, in countries such as in the Delaware, New York, UK, Singapore, British Virgin Islands, South Africa, Nigeria etc. He’s also a corporate governance and cross-border data privacy and tax expert.
As an award-winning writer and researcher, he is passionate about telling the African startup story, and is one of the continent’s pioneers in this regard