Wednesday, May 7, 2014

Equity Crowdfunding in the International Space - Pt. 1 France, CIGALES

(Given the US equity crowdfunding rules under the JOBS Act will soon be released by the Security and Exchange Commission, I thought I put togehter a mini-series on equity crowdfunding in different countries. The countries included in this mini-series will be France, Australia, Italy, England, and some other places.

I had written a larger paper for a law review for publication and this mini-series is a selection from that law review article. There is not much creativity here but I hope this will help people understand the equity crowdfunding landscape better and sort out some cross boundaries issues for themselves in a practical sense. The work here does not constitute legal advice of any kind. It's simply my accumulated knowledge provided for your learning.)


France is the third most active nation in terms of crowdfunding platforms, but in terms of uniqueness, the French takes the prize for its community-style investing and lending.

For more than 20 years, the “club d’investisseurs pour une gestion alternative et locale de l’epargne solidaire” (CIGALES) movement has had a strong presence in France. The CIGALES movement was founded by Patrick Sauvage in 1980. Sauvage’s vision was “a world where everyone finds the freedom to drive his destiny and takes part in the economy of his environment.”[1]

CIGALES operates as federation of investment clubs in which investors pool their resources to support small community businesses or other microenterprises. Each CIGALES club is not an investment club, but a club of investors. The distinction is its focus on the members and their goals prevailing over finances as opposed to money being the eventual goal of the project. These clubs are democratically governed (one person one vote, regardless of the amount of investments) and most of the projects are ethically operated local small businesses or businesses with particular social or cultural goals.

The Federation of CIGALES (the “Federation”) is entrusted with the growth and development of the movement and approves new CIGALES clubs. The process of chartering a CIGALES club includes registering the club’s by-laws with the tax authorities. There are approximately 180 clubs in operation at the end of 2011.

CIGALES clubs operates on the investment savings scheme. Instead of calling for funding for a particular project or venture, each club solicits contributions from its members on a periodic base. On average, each member contributes €25 per month. The average size of the clubs is 13 members.

Generally, members do not expect a return on their investments. Equity is permissible, however, under the French Monory law. The Monory law was enacted in 1978 to allow indivisibles entities (“Indivisions”)—based on the unanimity in democratic decision making (one person one vote)—to invest mutual funds in stock markets. Banks uses this system to start investment clubs for their large clients similar to angel funds. The CIGALES clubs use this system to directly invest in small firms and projects.

There are tax incentives to make these investments through CIGALES. Through the Madelin law, investors can deduct 25% of their investments; through the TEPA (travail, emploi, pouvoir d'achat—work, employment, purchasing power) law, investors can deduct 50% of their investment on the wealth tax.

In addition to the CIGALES clubs, WiSeed is a notable equity based corwdfunding platform for investors. WiSeed is not a CIGALES club and its legal status is unclear. Some notable projects funded by WiSeed in clued ANTABIO—a biopharmaceutical antibacterial drug discovery company in France.

[1] Arvind Ashta et al., Social Innovation Lessons from Microangels? An Institutional Entrepreneurship Case Study of the CIGALES Movement in France, 14 (Burgundy School of Business, Working Paper No. 25, 2012), available at

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