What is the extinctive management of a crowdfunding platform?
Extinctive management: definition and challenges for crowdfunding platforms
When a crowdfunding platform ceases its activity, current loan contracts do not disappear. Borrowers should continue to repay, and lenders should continue to collect their due dates. That is precisely the role of the Extinctive management : ensure the operational continuity of financial flows until the natural extinction of all loans in the portfolio.
The term “extinctive” refers to this concept of gradual extinction: each repayment brings the portfolio closer to its final closure. Unlike an abrupt liquidation, extinctive management ensures that each stakeholder — borrower as well as lender — maintains their contractual rights and obligations.
Why has fire management become essential?
With the entry into force of European PSFP regulation (EU 2020/1503), crowdfunding platforms must now have a business continuity plan including an extinct management system. This regulatory requirement is intended to protect investors from the risk of the platform itself failing.
In France, theAMF And theACPR ensure the proper application of these provisions. PSFP approved platforms must demonstrate that they have put in place a credible and operational mechanism for resuming management in the event of cessation.
Legal obligations in detail
- Have a formalized and tested extinctive management plan
- Make biannual migration tests to verify data transferability
- Proceed to a annual audit of loan contracts to detect anomalies
- Guarantee the continuity of services to lenders and borrowers in the event of cessation
- Informing regulators and investors about the arrangements put in place
The role of a specialized service provider like Runoff
Setting up extinguishing management internally represents a considerable challenge for platforms. Technical infrastructure, regulatory expertise, and management processes must be maintained for up to several years after cessation.
This is where a specialized service provider comes in. Runoff, a solution developed by Capsens, European fintech leader, offers a two-stage approach:
During the life of the platform
Runoff supports active platforms with semi-annual migration tests and annual audits of loan contracts. These regular interventions ensure that the day the cessation occurs, the transition is smooth.
In case of cessation of activity
Runoff takes care of the entire management of reimbursements. Borrowers and lenders have dedicated and secure spaces. Refund flows are automated, KYC processes are maintained, and rigorous monitoring is ensured until the wallet is completely extinguished.
An issue of trust for the entire ecosystem
Extinctive management is not just a regulatory constraint. It is a pillar of trust for the entire crowdfunding ecosystem. Investors who know that their investments are protected even if the platform is closed are more likely to participate in crowdfunding.
For platforms, having a robust extinctive management plan is also a commercial argument: it demonstrates professionalism and transparency that reassure investors and regulators.
Extinctive management transforms the cessation of activity of a feared risk into a controlled and supervised process, for the benefit of all stakeholders.
