“Legal and Compliance in the Legal and Compliance in the Application of Equity Crowdfunding to the Property Development Business Sam Shafie

Co-Founded by Sam Shafie and Kashminder Singh About pitchIN Started in June 2012 Co-Founded by Sam Shafie and Kashminder Singh “Home of Crowdfunding” – only platform to offer RCF and ECF in MY Raised 1st ever indie festival in South East Asia – TapauFEST in Penang One of the 6 Registered Market Operator to offer ECF 1st Issuer – KRU Academy ✔ and more coming soon! Register at www.pitchin.my

Equity Crowdfunding: A regulated activity

Malaysian Regulatory Framework on ECF

Philosophy Behind Equity Crowdfunding in Malaysia “The SC believes that leveraging on the power of crowdfunding will assist in the democratization of wealth, prosperity and ideas across the entire economy;....” Datuk Ranjit Ajit Singh Chairman, Securities Commission Malaysia Securities Commission Synergy and Crowdfunding Forum 19 September 2014

Why Equity Crowdfunding

Who Cannot Raise Money on the ECF? Commercially or financially complex structures; Public listed companies and their subsidiaries; Companies with no specific business plan or its business plan is to merge or acquire an unidentified entity; Companies other than microfund that propose to use the funds raised to provide loans or make investment in other entities; Companies with paid up share capital exceeding RM5 million; Any other type of entity that is specified by the SC

How Much Money Can Be Raised on the ECF? Up to RM 3 million within a 12 month period and a maximum of RM 5 million

Everyone Can Invest Retail Investor A max of RM5K per Issuer with a total amount of not more than RM50K within a 12-month period Angel Investors A max of RM500K within a 12-month period Sophisticated Investors No restrictions on investment amount

Disclosure: The Issuer Has To Provide Information that explains the key characteristics of the company; Information that explains the purpose of the listing and the targeted offering amount; Information relating to the business plan of the company

Raising more than RM500K Audited Financial Statements of the Company Financial Disclosure Raising less than RM500K Audited Financial Statements of the Company where applicable (issuer has been established for at least 12 months) Where audited financial statements are unavailable (company is new), certified financial statements or information issued by the issuer’s management Raising more than RM500K Audited Financial Statements of the Company

Due Diligence Check background of Issuer to ensure fit and properness of Issuer’s BOD, officers and controlling owners Verify the business proposition of the Issuer Ensure the disclosure documents lodged is verified for accuracy

Compliance Ensure fund raising limits are not breached Monitor conduct of Issuer and take action if misconduct happens No material adverse change relating to the offer during the offer period Cooling of 6 business days have expired

Microfund Fund managers may raise money on an ECF platform provided the following are met: Entity are registered with the SC as a VC Specifies investment objective Raises money only from Angel and Sophisticated Investors

Example of Property Development using Equity Crowdfunding

Property Crowdfunding in MY A Sdn. Bhd. may be incorporated (for the purpose of investment holding). The Sdn. Bhd. will be listed on ECF Platform to raise funds to buy properties. The Sdn. Bhd. should have a clear investment objective so that it is not caught by the ECF guidelines on prohibited issuer (companies with no specific business plan). It is the Sdn. Bhd. itself that will be dealing/managing with the property. Investor chooses a property that he likes, and invests and becomes a part owner of the property together with a group of other people. A special purpose vehicle will be incorporated where all the property owners are shareholders in the SPV that own the property. The Investor will earn rental income from the property. The Investor may exit by selling his share in the property to other investors on a willing buyer willing seller basis.

Summary Property Crowdfunding via Equity Crowdfunding is possible Amount that can be raised however is up to RM 5 mil. Too small for a full scale property development project. Microfund as an option

Sam Shafie sam@pitchin.my Thank You Sam Shafie sam@pitchin.my