Published On: Fri, May 3rd, 2019

A Legal Framework for Crowdfunding on St. Maarten

Investment Club session

By Terrance Rey

Crowdfunding has no legal basis here on St. Maarten. Generally, it boils down to making a donation. There is a maximum amount a private person can donate to another person for it to be considered tax-free; not be subject to income tax on the recipient’s part and for it to remain tax deductible on the donor’s part. But that is a good discussion to have with your tax adviser. Here I am going to talk about a format for Crowdfunding on St. Maarten that is completely legit according to the laws of Country Sint Maarten and that is via the use of “Investment Clubs”.

But first, to create some context for this discussion, let me explain what Crowdfunding is. In an old article I published in 2012, I wrote that Crowdfunding or crowd funding (alternately crowd financing, equity crowdfunding, or hyper funding) according to Wikipedia describes the collective cooperation, attention and trust by people who network and pool their money and other resources together, usually via the internet, to support efforts initiated by other people or organizations.

I also wrote that Crowdfunding occurs for any variety of purposes, from disaster relief to citizen journalism to artists seeking support from fans, to political campaigns – think about the recent GoFundMe campaign for the imprisoned Curacao politician Gerrit Schotte – to funding a startup company, movie or small business or creating free software.

What does all of this have to do with St. Maarten? And why am I bringing this topic back up again? Well, as I wrote in 2012, a relatively small community like St. Maarten has the perfect size for Crowdfunding. Most people are friends or related to each other. So it should be relatively easy for an entrepreneur or small business to raise funding using the Crowdfunding model.

CrowdfundingThe news gets even better – and this is the reason why I am republishing the content of my old article: A legitimate framework already exists here on St. Maarten that allows entrepreneurs and small businesses the ability to legally raise up to a maximum of 500,000 guilders for their ventures.

This can be done using the Investment Club model. Participants in an investment club, up to a maximum of 25 natural persons, can each invest a maximum of 20,000 guilders, thus a total of 500,000 guilders, in an investment opportunity without a license or supervision from the Central Bank of Curacao and St. Maarten (CBCS).

In anticipation of legitimate and legally compliant Crowdfunding platforms on St. Maarten, I suggest St. Maarteners pool their resources and form investment clubs. Theoretically speaking, 20 investment clubs can effectively raise 10 million guilders to offer entrepreneurs and small businesses capital in exchange for equity. I am thinking big of course, but small investment clubs are also possible. Each participant can choose to put in 100 to a 1000 guilders and pool from any amount up to 20,000 guilders to invest in start-ups or provide micro-financing to small businesses.

If banks are only offering 1 to 2% interest on savings, pouring some of your savings into an investment club can do more than just raise capital for investments, but potentially offer you a significantly higher return on your investment than a savings account ever will.

Besides the potential for a good return on investment (ROI), investing your money via Investment Clubs has a lot of positive spin-offs for St. Maarten. One is the creation of jobs. It is well known by now that that more net jobs creation is generated by small businesses than any other sector of the economy. Another benefit of investment clubs is the social aspect: the coming together of a group of like-minded individuals who wish to pool not only their money for a common investment or business cause but also their knowledge, talents and experiences.

But most importantly, by participating in an investment club you will be giving yourself and other local St. Maarteners the ability to pool resources and own businesses, properties and other forms of productive assets worthy of investing in.

Therefore, investment clubs as a legal framework for Crowdfunding on St. Maarten is definitely something to think about!