Equity-based crowdfunding and Armenian start-ups. Whether the current regulatory framework of Armenia in relation to legal entities and protection of investors engaged in public trading of shares creates obstacles for startups to raise money via equity-based crowdfunding

Abstract

This paper will research the global trends regarding ECF and will compare the various regulatory approaches in order to suggest amendments to Armenian legal framework. Chapter 1 will discuss the main regulatory issues concerning ECF in the context of start-ups and small and medium enterprises. In this part, legal articles will be reviewed to get a better understanding of the existing problems in this field and the analysis and solutions of legal scholars on them. This chapter will present the “Bridgefunding Theory” developed by Seth Oranburg which is one of a kind in proposing solutions to issues of start-up financing. Chapter 2 will examine different regimes of ECF in the USA, UK, and Greece and will show the benefits and drawbacks of each model. Chapter 3 will present the main issues of RA legislation and regulations that create hurdles for the expansion of Armenian entrepreneurship and will propose amendments that will help to introduce reforms into laws and regulations governing Armenian securities market. This paper tries to argue that even though investor protection should be adequately addressed in public trading of shares, the regulators should consider that on the other side of the scale there are companies which because of regulatory hassles are unable to access to capital markets. Additionally, the goal of investor protection can be achieved through other means as well, and exemptions such as ECF are great tools that allow the regulators to structure a legislation that will both be protective of investors and will have positive effects on the country’s economic growth and development.