How does equity crowdfunding work legally in the UK?
By SuLe · Updated 28 May 2026
Equity crowdfunding lets the public buy shares in your startup through an FCA-authorised platform, which is what makes the public promotion lawful. Because the platform is authorised, it can communicate or approve the financial promotion under section 21, categorise investors, and run the appropriateness checks and risk warnings the FCA requires. You cannot lawfully run the same public campaign yourself.
Key facts
- The platform, not your company, is FCA-authorised — so it communicates or approves the promotion under section 21 FSMA, which is why a public raise is lawful.
- Retail investors are categorised: restricted investors typically confirm they will not invest more than 10% of net investable assets in high-risk investments; others self-certify as high-net-worth or sophisticated.
- The platform runs an appropriateness check before anyone can invest, and applies prescribed risk warnings.
- FCA rules ban inducements to invest (like referral bonuses) and require positive frictions such as cooling-off periods on direct-offer promotions.
- Crowd investors usually sit behind a nominee, so your cap table shows one line rather than hundreds of shareholders.
Why is crowdfunding lawful when a public advert isn't?
The difference is authorisation. Section 21 FSMA bans an unapproved financial promotion, and a public "invest in us" campaign is exactly that — unless an FCA-authorised firm approves or communicates it.
An equity crowdfunding platform is that authorised firm. When your raise appears on it, the platform takes responsibility for the promotion: it reviews and approves the campaign, categorises each investor, and runs the checks the FCA requires. Its permission does the legal work your company cannot do itself.
That is why you cannot simply copy the campaign onto your own website or LinkedIn. Off-platform, the promotion loses the authorised firm's cover and you are back to needing an exemption. [More: Can I publicly advertise that my startup is raising money?]
Who is allowed to invest, and what checks apply?
Crowdfunding opens the raise to retail investors, but only after categorisation. Investors are sorted into restricted (ordinary retail), high-net-worth or sophisticated categories, each with its own declaration.
Restricted investors typically have to confirm they will not invest more than 10% of their net investable assets in high-risk investments — a self-imposed cap designed to limit exposure. High-net-worth and sophisticated investors self-certify against the usual criteria.
The platform then runs an appropriateness check — a short assessment of whether the investor understands the risks — before allowing them to invest. These steps are the platform's regulatory responsibility, and they are not optional.
What consumer protections come with a crowdfunding campaign?
The FCA treats these as high-risk investments, so several protections are baked in. Campaigns must carry prescribed risk warnings, and the platform cannot dangle inducements to invest, such as referral bonuses.
There are also "positive frictions": for direct-offer promotions, rules require steps like cooling-off periods so investors do not commit on impulse. The idea is to slow the decision down and make the risk unmissable.
These protections are a feature of the authorised route. Trying to short-circuit them — for example by moving keen investors off-platform to avoid the checks — undermines the very authorisation that made the campaign lawful, and puts you back in section 21 territory.
How do the mechanics and the cap table work?
Legally, crowd investors are subscribing for shares in your company, usually documented through the platform's process rather than a bespoke negotiation. Most founders pair a crowd round with SEIS/EIS advance assurance, which many crowd investors expect, though that tax status is separate from the promotion rules.
To keep the cap table manageable, platforms generally use a nominee structure: a nominee company holds legal title to all crowd investors' shares, with the investors as beneficial owners. Your register shows one shareholder and you obtain one signature for consents. [More: What is a nominee structure in crowdfunding?]
| Element | Who handles it | Why it matters |
|---|---|---|
| Financial promotion (s.21) | FCA-authorised platform approves/communicates | Makes the public campaign lawful |
| Investor categorisation | Platform | Restricted investors self-limit to 10% of net investable assets |
| Appropriateness check | Platform | Confirms the investor understands the risk before investing |
| Risk warnings / cooling-off | Platform | Prescribed FCA protections for high-risk investments |
| Shares + cap table | Platform nominee (usually) | One cap-table line instead of hundreds of shareholders |
Worked example
Ben is raising £250,000 for a direct-to-consumer food brand and lists on an FCA-authorised crowdfunding platform. He secures SEIS/EIS advance assurance first, because crowd investors on the platform expect it.
The platform reviews and approves his campaign as the financial promotion, so the public pitch is lawful under section 21. Each investor is categorised — most as restricted, confirming they will keep high-risk investments under 10% of their net investable assets — and passes an appropriateness check before investing.
Ben's temptation is to message enthusiastic followers directly to "skip the fees". His solicitor warns him off: off-platform, that pitch loses the platform's authorisation and becomes an unapproved promotion. He keeps everything on the platform, and the crowd's shares sit behind its nominee.
Where founders go wrong
Copying the campaign off-platform
— the platform's authorisation does not travel; a public pitch on your own channels needs its own exemption or approval.Trying to remove the frictions
— cooling-off periods and risk warnings are mandatory protections, not obstacles to design around.Confusing tax status with promotion law
— SEIS/EIS advance assurance helps sell the round but does nothing to satisfy section 21.Ignoring the nominee's terms
— how the nominee votes and passes on information affects your governance, so read the platform's structure before you commit.
Related questions
Why can a crowdfunding platform advertise a raise when I can't?
Because the platform is FCA-authorised. It communicates or approves the financial promotion under section 21, categorises investors and runs the required appropriateness checks. Your own company is not authorised, so the platform's permission — not yours — is what makes a public-facing campaign lawful.
Who can invest through a crowdfunding platform?
Retail investors, once categorised. Restricted investors typically confirm they will not put more than 10% of their net investable assets into high-risk investments; high-net-worth and sophisticated investors self-certify against the usual criteria. The platform runs an appropriateness check before anyone invests. [More: Can anyone invest in my startup, or are there investor eligibility rules?]
What are the risk warnings and cooling-off rules?
FCA rules for these high-risk investments require prescribed risk warnings, a ban on inducements to invest such as referral bonuses, and positive frictions like cooling-off periods on direct-offer promotions. The platform builds these into the journey; you cannot bypass them by pitching investors off-platform.
Do I still need SEIS/EIS advance assurance?
It is separate but usually worth having. Advance assurance signals to crowd investors that SEIS or EIS relief should be available, which many expect. It does not affect the financial-promotion analysis — the platform's authorisation is what makes the campaign lawful, not the tax status.
How do hundreds of small investors sit on my cap table?
Usually through a nominee. The platform's nominee company holds legal title to the crowd's shares, with investors as beneficial owners, so your cap table shows one line and you get one signature for consents rather than chasing hundreds of shareholders. [More: What is a nominee structure in crowdfunding?]
Crowdfunding is lawful because a regulated platform carries the promotion — but the moment you pitch investors off-platform, that protection disappears and section 21 is back in play. A SuLe solicitor can review your platform terms, nominee structure and any off-platform outreach before you launch. Book a free call before you promote your raise and run the campaign cleanly.
Keep reading: What is a nominee structure in crowdfunding? · Can anyone invest in my startup, or are there investor eligibility rules? · Can I publicly advertise that my startup is raising money? · Who counts as a high-net-worth or sophisticated investor? · Do angel syndicates need FCA authorisation?
Primary sources: FCA — Financial promotions and adverts · Financial Services and Markets Act 2000, section 21 · Financial Promotion Order 2005
