if I wanted to crowdsource funds .. hold the funds for a pre-determined time and then transfer the fund to the receiving person, what regulations would I need to adhere to?
Province: western cape
Welcome, and thank you for your question.In order to enable me to assist, could you perhaps provide further information.1. What is the nature of your business?2. For what purpose will the funds be sourced?3. How much?4. Where do you plan to source the funds, locally or from overseas?5. Where will the funds be held?6. Will you be acting as an intermediary or are the funds intended for your own use?7. Any other information that could place your proposed transaction in the proper context.Yours faithfully,
I am investigating a crowdsourcing funding website.
There will be a campaign that will run, the campaign will have a target.
Users will be able to use their credit cards to help a campaign reach it's target by giving money to the campaign.
The money will sit in the sites merchant account until it is time to pay the funds across to who ever the campaign intended it to go to.
The funds can be sourced for what the user that starts the campaign dreams up.
The total amount of a campaign can be anything but we could set a limit
The funds will be sourced locally
The funds will held in the merchant account
The site will act as an intermediary
It is similar to other fund sourcing site around the world, I am programmer and have no idea of what legal obligations I will need to meet
Welcome, thank you for the opportunity to address your question.I need a bit more information in order to provide you with a comprehensive answer:
The site would be similar to http://www.indiegogo.com/
It's a crowd funding site.
A user would start a campaign to raise x rands.
Other users can help that user reach the targeted amount.
Once the campaign tilts .. target is reached the money is debited from the donating users credit cards and transferred to the user who started the campaign. So no money is actually held by the site, but it acts as some kind of intermediary.
So I guess the payments would be solicited donations.
The website doesn't need to be funded, I just to find out what legal regulations if any I need adhere to
Whilst you no longer require a fund raising number in order to raise funds under the Non Profit Organisation act it could be prudent to register as a Non-Profit Organisation as it would certainly add to the credibility of the service offered and would provide a structure to ensure all funds are duly paid over for the purpose they were donated. Given the high risk of fraudulent beneficiary claims, it would be prudent to manage the endeavor from within a Company to reduce personal potential liability.
Legislation, regulations and terms you need to consider:
In summary, it is plausible but the you would have to be attentive to the vehicle (non-profit company etc), the means (payment methodology) and the risk posed by misrepresentation.
I trust that the legal information and perspective provided is helpful in assessing your position going forward. I am always happy to clarify any aspect of my answer should you so require.
Thanks, XXXXX XXXXX more thing :)
The way the site will make an income will be to take a small % 3-5% of the funds accumulated .
How does think affect the legal standing
I would strongly suggest that the benefactors are charged for reasonable website costs and screening costs in the form of a fixed fee together with ad valorum administration and advertising service charges and an ad valorum commission. You would be required to declare your interest in the proceeds to the donors within the site terms and conditions.
It would also be prudent for the benefactors to agree to your right to set-off any costs against the accumulated donor proceeds before the beneficiary is paid out.
B.Com LLB Registered Corporate lawywer
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