Crowdfunding seems to be an alternate avenue of fund raising being explored by a number of start-ups in India. However, it seems to be operating within a legal ‘grey area’ in terms of applicable laws, without any clear indications from any statutory or judicial authority. Thus, till the legislature enacts a specific law, fund raising through crowdfunding must be interpreted in light of existing provisions.
From a company’s perspective, such as yours, the Companies Act, 2013 and its applicable rules would govern such fund raising. Depending on the number of participants and their identities, you may choose to raise funds through a preferential allotment or a private placement. Note that you would be bound by all the statutory requirements under the Act, the most important being that such ‘offers’ seeking funds cannot be made to more than 200 persons.
As an alternative, in case you do not want to relinquish control over the operations of your company, you may also explore debt financing through the issue of debentures to prospective investors.
In any situation, the nature and characteristics of the instruments you issue to raise the funds would depend on various aspects concerning the nature of business, the degree of third party involvement, the business model of the company, etc. Feel free to reach out to me over LinkedIn if you would like to discuss this further.
On another note, the SEBI issued a caution notice to investors in Aug 2016 in the form of a press release, stating that electronic platforms are facilitating fund raising which are similar to stock exchanges, in violation of applicable laws; and investors are cautioned in dealings on such authorised platforms as being in contravention of applicable securities laws. Although this press release does not have the force of law as yet, you may like to consider the implications of engaging in crowdfunding activities through online portals.