Crowdfunding in Guatemala

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Crowdfunding in Guatemala

By Mélida Pineda and Francisco Pineda[*]




Crowdfunding is currently a global trend and an effective alternative for raising funds that can be used in various types of industries, from the music industry and inventors to companies and real estate developers, and even in the stock market.


The first crowdfunding platform on the internet was ArtistShare, which started in 2003. Through this platform artists could obtain funds from their followers and fans to finance their albums and musical productions. ArstistShare was very successful, which led to the creation of other platforms such as IndieGoGo in 2008, Kickstarter in 2009, and GoFundMe in 2010, among others[1].


Currently there are several types of crowdfunding, such as: products, equity, loans, real estate, charities and cryptocurrencies[2].


The growth in popularity and investing opportunities in this alternative way of financing has led to changes in legislation of several countries in order to adapt and take advantage of this new type of “industry” that is estimated to be over thirty billion dollars globally[3].


What does crowdfunding mean?


“Crowdfunding involves an open call, mostly through the Internet, for the provision of financial resources either in the form of a donation or in exchange for some form of reward, to support cause or projects with specific objectives”[4].


Crowdfunding is an alternative form of financing that allows access to capital, with varying purposes. Crowdfunding may also be an alternative for the general public, with small or moderate amounts of capital, to invest and obtain a higher return on their investment than through traditional banking[5].


Crowdfunding regulation


United States


In 2012, the "Jumpstart Our Business Startups Act (JOBS Act)" was approved by President Barack Obama. This law was a response to the growing popularity of crowdfunding, especially in the United States[6].


Securities and investment capital is regulated through the Securities Act of 1933, which establishes that any offer of public securities must be registered, unless it meets certain requirements that exempt it from registration. With the introduction of the JOBS Act, securities were offered without the need to register as long it was offered only to: a) investors known as "Accredited Investors", which requires the investor to have certain income or net worth (Rule 506(c) General solicitation)[7], or b) the use of private offers, usually through family, friends and acquaintances (Rule 506(b) Private offerings)[8].


In 2016, the "JOBS Act, Title III - Regulation Crowdfunding" was implemented, allowing the offering and negotiation of securities through crowdfunding, but with restrictions on the amount that can be invested over a period of 12 months[9]. The regulation is still recent and States are trying to adapt their internal regulation to facilitate the implementation of crowdfunding.



In 2014, France adopted specific regulation for crowdfunding through Ordinance No. 2014-559 and later developed by Decree number 2016-1536 in 2016. Through these new laws, the Investment Council in Collective Financing and the Collective Financing Investment Intermediary were created. These institutions, along with the amendment of the limitations to public offerings of securities, have allowed the advancement of the crowdfunding industry in France[10].




Italy is one of the countries with specific regulation regarding crowdfunding: the Commissione Nazionale per le Società e la Borsa (CONSOB) (supervisory authority of the financial sector in Italy),  through decrees No. 179 and 221 of 2012, amended the old Consolidated Law on Finance, making Italy one of the first countries in Europe to adopt this new financing alternative[11].


Other countries in Europe

Countries such as the United Kingdom and the Netherlands have developed crowdfunding through existing financial regulation. Close supervision of financial supervisory entities and slight modifications to existing requirements and legislation has allowed their legal framework to adapt and allow crowdfunding in their jurisdictions[12].


The European Union as whole has also taken steps towards having a cross-border legal framework regarding crowdfunding. In 2014, the European Commission issued a Communication on unleashing the potential of crowdfunding in the European Union. Public consultation among crowdfunding platforms was made, showing that 38% of the platforms perform cross-border operations. The primary objective of the regulation to be implemented is to protect investors while enabling companies to access crowdfunding alternatives[13].



Mexico has taken the lead in the regulation of crowdfunding in Latin America, with the Law for Regulating Financial Technology Institutions enacted in March 2018. This law, called the Fintech (financial technology) Law, specifically regulates crowdfunding, taking into account mainly two aspects: (i) licensing for financial technology companies; and (ii) operations with virtual assets (cryptocurrencies)[14].




Colombia has more recently approved crowdfunding regulation in August 2018, through decree 1357. The new regulation has authorized stock markets, securities exchange administrators and stock corporations to implement crowdfunding projects. This decree places a limit on the amount that can be collected from each investor and requires registration before the Financial Superintendence of Colombia[15].

Crowdfunding in Guatemala


Guatemala does not have specific legislation for crowdfunding. The Initiative 5241 called "Law of Strengthening Entrepreneurship" was under discussion in Congress since 2017 and included the possibility of using collective financing (also called micro-sponsorship) as one of the financing alternatives for entrepreneurship projects. Article 29, letter e) of the Initiative defined the figure "as a network of collective financing, that through financial or other donations, managed to finance a certain project of entrepreneurship in exchange for rewards or participations altruistically". The Initiative recognized three types of collective financing: (i) donations; (ii) rewards; and (iii) equity.


However, the final draft of the Initiative 5241 that was approved through the Law Decree 20-2018 excluded the figure of collective financing completely and only created a new type of company: the Entrepreneurship Companies.


There are, however, different regulations spread across different laws that cover issues related to crowdfunding, such as public and private offerings, financial intermediation, trusts and mortgages, among others.


Financial intermediation, which consists in collecting funds from the public to carry out credit or loan operations, is heavily regulated[16]. Therefore, any form of peer-to-peer lending or loan-based crowdfunding with funds collected from the public is forbidden. This activity is prohibited for individuals or private entities not registered and subject to the oversight of the Superintendence of Banks. In the case of Guatemala, the method for collecting the funds from the public and the use of such funds must be carefully analyzed.


The Securities Market Law contains limitations regarding offerings of securities: when the invitation to invest is issued to the general public and qualifies as a public offering, it is subject to registration at the Stock Exchange[17].


Regarding the investment title to be offered to the public, the legislation allows the creation of a variety of legal titles, depending on the investment vehicle used for the potential crowdfunding structure and the product that it is desired to offer to investors. Some investors may be interested in equity in a company, others in the ownership or co-ownership of an asset, and yet others in credit instruments, secured or non-secured, with a variable or fixed return, or a combination of those. Investors may consider some instruments more valuable than others, according to the level of risk associated with the instrument and the return offered.


Crowdfunding may be implemented in Guatemala through corporations, trusts, investment trusts, fiduciary certificates and mortgage certificates, among others, allowing for the creation of attractive investing products to be offered to investors. Trusts are an interesting and flexible option to implement a crowdfunding structure, which allows for the creation of various “pools” of assets that may be associated to a single investor or to a group of investors, or that may serve as collateral for several types of investments. Debt instruments like mortgage certificates are also viable options, as investment titles backed up by real estate properties.


Any of these figures must be carefully analyzed from a corporate, financial, tax and regulatory perspective.




[1] Freedman, David and Matthew Nutting. A Brief History of Crowdfunding. 2017. P. 1-3

[2] See note 1. P. 3-5.

[3] Massolution and 2015CF Crowdfunding Industry Report. [online] [Retrieved September 03, 2018].

[4] Belleflame, Paul and Thomas Lambert, et al. Crowdfunding: Tapping the right crowd. Journal of business venturing, volume 29, number 5, 2014, p. 585.

[5] Obiora, Sandra. The Case of Alternative Versus Traditional Financing: A Literature Review. Archives of Business Research, volume 5, number 9, 2017, p. 45.

[6] United States Securities and Exchange Commission. Jumpstart Our Business Startups (JOBS) Act. [online] [Retrieved September 03, 2018].

[7] United States Securities and Exchange Commission. General Solicitation Rule 506 (c) [online] [Retrieved September 03, 2019].

[8] United States Securities and Exchange Commission. Private Offerings Rule 506 (b). [online] [Retrieved September 03, 2019].

[9] United States Securities and Exchange Commission. Regulation Crowdfunding. [online] [Retrieved September 03, 2019].

[10] Benois, François-Régis. Equity crowdfunding: Legal framework, regulatory concerns and perspectives in France. European Institute of Financial Regulation - Autorité des Marchés Financiers. [online] [Retrieved September 03, 2019].

[11] Solar Plaza. Crowdfunding Legal Framework Overview. 2015. [on line] [Retrieved September 9, 2018].

[12] European Crowdfunding Network. Review of Crowdfunding Regulation. Belgium, Europe Crowdfunding Network AISBL, 2017, p. 454-460 and 653-658.

[13] See note 11.

[14] Eid, Salomón. Regulación Fintech en Latinoamérica – México. 2018 [online] [Retrieved September 3, 2018].

[15] Regulación de crowdfunding en Colombia impone reglas a financiación colaborativa. El Tiempo. [online] [Retrieved September 09, 2018].

[16] Article 96, Law of Banks and Financial Groups of Guatemala, defines Financial Intermediation as follows: “A person commits the felony of financial intermediation when an individual person or legal entity, local or foreign, without being authorized, through private or public offerings, directly or indirectly, by itself or through others, for its own benefit or for the benefit of others, performs an activity consisting of acquiring money from the general public, or any other instrument representative of money, either through the reception of money itself, checks, deposits, down payments, loans, bonds, legal titles or any other obligation, including contingent operations, using the amounts received to perform financing operations (…)”.

[17] According to Article 3 of the Securities Market Law, an offering will be considered private as long as it is offered to no more than 35 individuals or companies, in which case it will not be subject to the limitations of the Securities Market Law and public offerings.


[*] Mergers & Acquisitions, Competition and Labor Law at Carrillo y Asociados, Guatemala.

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