The Legal Regulations Of Risk In Equity-based Crowdfunding In China

Nowadays,equity-based crowdfunding,a new financing mode,becomes increasingly popular on the Internet.Equity-based crowdfunding is always applied in small or medium enterprises which are nor qualified for listing to raise funds in a short time relying on the Internet to sell their equity to the public.Some investors prefer it because of its advantages,such as activating a large number of available private capital,improving the competitiveness of small and medium enterprises and so on.However,internet finance in China is still in the starting process without perfect relevant legal regulations and regulatory policy,and there are muck fraud risk and some other legal risk in the market of equity-based crowdfunding.So,equity-based crowdfunding raises much controversy since beginning – whether it is legal,whether it would benefit the development of social economy,whether it should be legitimated,if it should,how to standardize,all above is the focus.According to the existing laws of our country,if equity-based crowdfunding is regarded as an open sale stock issue,there is no doubt that it would be involved in the risk of issuing securities illegally and violate the organizational form of the company.In order to solve the legal dilemma that the stock rights are facing at present,we should firstly clarify the rights and obligations of the stakeholders and the legal relations between the various subjects,set up the strict subject qualification requirements,and introduce the single line of legal norms to meet the needs of the development of the stock rights.In addition,we can also draw on the legislative experience of the western countries to build the exemption system for the issuance of securities in small enterprises,not only to meet the legal requirements of the public equity,but also to ensure the basic stability of the superordinate law,such as the securities law,and not to make the whole financial market subversive.In practice,the legal relationship between the main bodies of the equity-based crowdfunding is unclear,the rights and obligations are not clear,the information of all parties in the transaction process is seriously asymmetrical,which leads to the unequal trading status of all parties and the risk of fraud.To prevent fraud in the process of equity financing,we must establish a legal supervision system.Through the establishment of pre-qualification examination system,process declaration systemand information disclosure system,and the supervision and relief system of investors,as far as possible to standardize and put the holding power to all parties in the project,increase the illegal cost of fraud,thus achieve the effect of restricting the main body of the parties,and protect the public and honest operation of the stock market.This paper will base on our existing legal system,refer to the legislative experience of foreign research to distinguish differences between equity-based crowdfunding and traditional finance,and will consider from starters of the company,investors and other risks to plan out a complete set of legal system which is suitable to present situation of legal regulations in equity-based crowdfunding in China.