Cyprus has tabled a bill in parliament introducing fines of up to €500,000 or up to 5% of annual turnover for breaches of the law governing crowdfunding services for businesses, as the country moves to complete a harmonisation process that was due by November 2021.
The bill transposes EU Regulation 2020/1503 on European crowdfunding service providers for businesses into Cypriot law and is expected to be discussed shortly by the parliamentary Finance Committee. An accompanying note states that the bill is the only permissible option, as it completes mandatory harmonisation provisions, and provides for the repeal of the existing law.
The European Commission’s DG FISMA flagged gaps in Cyprus’s transposition of the regulation. Member states were required to publish compliance measures by November 10, 2021. The accompanying note warns that if the Commission refers Cyprus to the Court of Justice of the European Union, conviction is considered likely, with significant financial penalties to follow.
Under the bill, the competent authority — the Cyprus Securities and Exchange Commission — will have discretion to apply either fine depending on the size of the company and the severity of the breach.
The 5% fine would be calculated on the basis of the last available financial statements approved by the legal entity’s board. The EU regulation requires sanctions to be effective, proportionate and dissuasive, but does not specify when the fixed fine should be applied rather than the turnover-based one.
The framework covers businesses seeking funding through a licensed crowdfunding platform. It is designed primarily as an alternative funding source for start-ups and small and medium-sized enterprises, though other businesses meeting the platform’s criteria are not excluded.
The EU regulation sets uniform requirements for crowdfunding service providers covering operations, organisation, licensing and supervision, as well as transparency, investor protection and advertising across the bloc. The legislation also determines who may operate as a crowdfunding service provider in Cyprus and establishes liability for information provided to investors.