Virtual shares are not meant to be issued as financial instruments, e-money, payment instruments or virtual currencies. The purpose of virtual shares is always limited to rewarding the behaviour of issuer’s community. However, regulations vary from country to country, and we are carefully assessing the regulatory requirements in different countries to ensure that our services are compliant with the applicable regulations.
There are certain characteristics related to virtual shares and KOOS services that limit the application of financial regulations, specifically:
- virtual shares are not issued for cash consideration or for consideration other than cash, they cannot be deemed as an investment into an issuer
- virtual shares are issued to a recipient personally for their behaviour and they are genuinely non-transferable. This means that the rights represented by a virtual share can be used only by the recipient who cannot transfer the virtual to a third person. Also, as we see it – virtual share cannot be pledged or otherwise encumbered
- virtual shares are not instruments recorded and transferable in blockchain and they should not become acceptable as a means of payment by third persons
- KOOS platform does not facilitate fundraising or transferability of virtual shares, i.e., it does not bring together issuers and recipients, and it does not bring together recipients with sale or purchase interests.
In addition, KOOS has set eligibility criteria for its services and virtual share programs.
Eligible issuer is a company or other legal entity that has been incorporated in Estonia, Latvia, Lithuania, Finland, UK or in another country which KOOS deems eligible from time to time. In certain circumstances, also a private individual, for example a major shareholder of a company can be an issuer.
KOOS expects to gradually expand the list of eligible countries and this can take place in cooperation with potential issuers from the respective country. It is important that the issuer, and also KOOS, are informed and acknowledge all legal, regulatory and tax implications applicable to virtual share program in that country.
As a rule, the issuer must be a privately held company. This means that its shares, bonds, or other instruments may not be admitted to trading on a stock exchange or other regulated market. If the company is not privately held, then additional rules and restrictions may apply to the issuance of virtual shares and KOOS will consider such issuers on a case-by-case basis. The issuer may not be subject to bankruptcy, liquidation, reorganization or similar proceedings or otherwise in financial difficulty at the time of launch of the program.
Eligible recipient is a private individual (natural person) who is at least 18 years old and has active legal capacity and is residing in an EEA country or in the UK. Eligible recipient may also be a company or other legal entity that has been incorporated in the mentioned country. Similarly to issuers, KOOS expects to gradually expand the list of eligible countries by mapping respective legal and regulatory requirements in potential markets.
If one or more of these criteria is not met by a potential recipient, then the issuer may decide to reserve virtual shares for such person, but the latter can accept the virtual shares only after it has met all the eligibility criteria, for example, become at least 18 years old.