His Royal Highness Sheikh Mohammed Bin Rashid Al Maktoum, the ruler of Dubai and the Prime Minister of UAE presided over the last cabinet meeting at Expo 2020. The UAE has established a government mechanism for sponsoring creative company ideas through crowdfunding platforms which would allow government and private sector players can crowdfund projects if they obtain the appropriate approvals from the relevant authorities. The authorities of course will have to ensure that those who apply would have a detailed work plan.
“Financial technology has undergone disruptive innovation in recent years, and the financial services sector is transforming access to credit in several ways. As they look for ways to raise money, start-ups and small and medium businesses are turning to crowdfunding. Due to its business-friendly policies, Abu Dhabi and Dubai are home to a lot of digital start-ups”, says Adv. P.M Mishra from Finjuris Counsel FZ-LLC. As the term implies, crowdfunding entails receiving capital from the ‘crowd,’ or a huge pool of people investors (mainly retail), rather than a bank or other financial institution. Beehive and Eureeca are the two examples of crowdfunding platforms in the UAE.
The Securities and Commodities Authority will be in charge of the activity’s regulation. Sheikh Mohammed considers crowdfunding as one of the finest methods to finance fresh and inventive ideas. The objective behind this decision is to facilitate a mechanism that will help young entrepreneurs to convert their ideas into reality. The technique of obtaining money from a large number of individuals to sponsor a project or business is known as crowdfunding. A crowdfunding legal consultant would definitely be helpful in such regards.
The approach addresses all technological aspects of crowdfunding platform operators’ regulation. Definitions, scope of application, operator license requirements, operator responsibilities to SCA and investors, financing applicant obligations, and investor, operator, and financing applicant rights are all covered. Surveillance, inspections, and penalties are also addressed in the strategy.
Sheikh Mohammed also announced that the UAE Cabinet has adopted a new legislation allowing cooperative organizations to be listed on financial markets. This will assist them in obtaining strategic partners.
The Crown Prince of Dubai, Sheikh Hamdan bin Mohammed, launched “Dubai Next” in May, a digital fundraising platform for entrepreneurs and start-ups. It was created to allow Dubai-based individuals and businesses with creative initiatives to create a campaign on the platform and seek the UAE community to support and make their business idea into a reality.
Sheikh Hamdan noted at the time that the effort was aimed at creating good competition and encouraging youngsters to bring forth new ideas as well as acquire community support through crowdfunding.
These initiatives would enhance UAE’s stand in the business arena and ensure that Dubai remains to be a very pivotal financial hub globally. It would also help in development and promotion of entrepreneurship in the region. Crowdfunding has brought a new level of transparency to investing that other types of investments cannot always provide. When investing in a startup, for example, an investor can learn everything there is to know about the firm before committing any funds.