The Securities and Exchanges Board of India (SEBI) is close to finalising the norms for crowdfunding in India.

According to Livemint, two sources privy to the developments stated that SEBI will set a cap of 25 percent stake for crowdfunding investors.

Mint also reported that the regulator will require investors via crowdfunding to seek its permission before investing, and also provide the relevant information to other investors in the startup/company.

The report said, quoting sources, that companies funded by more than 200 such investors through the investment channel may be exempt from the private placement norms of the Companies Act as well.

These norms require a company to compulsorily make a public offer and list the securities on a recognised stock exchange for investors numbering more than 200.

This is key for the successful proliferation of crowd funding, as startups are not comfortable in listing themselves on a public trading platform and sharing their details with the public at large.

SEBI may also consider allowing large firms and institutional investors to use this channel for funding smaller enterprises. One of the sources said that the reason for this would be to help genuine entrepreneurial activities with a wider net of funding options as opposed to angel investors who sometimes dictate their terms and even close the option of a company reaching out to other investors.

Once SEBI norms are in place, access to crowdfunding platforms may be protected by a password, said the second person to Mint.

Another possible development would be that SEBI may also ask companies to secure an approval from all shareholders for any material corporate decision, which would be mandatorily disclosed to SEBI.