Debtset – Bailiff-Sheriff Aust MEMBER Login
Small business crowd funding legislation set
LEGISLATION was introduced to Federal Parliament in its final sitting for 2015 that aims to to provide a framework for crowd-sourced equity funding – a case of the government playing market catch-up. But other elements in the package take a lead in helping to create alternative funding markets to traditional property-equity banking sources.
The legislation will allow unlisted public companies with less than $5 million in assets and less than $5 million in annual turnover to raise up to $5 million in funds in any 12 month period. The Federal Government believes its framework has advantages over current crowd funding schemes in competitive countries, such as the US. 
The fact that the Small Business Minister and Assistant Treasurer, Kelly O’Dwyer, has had to describe the process more completely as crowd-sourced equity funding (CSEF) is an indicator of the chase the legislators are engaged in to equip and foster this market with a framework that, up until now, has lagged behind countries such as the US and the UK.
Until this legislation passes, crowd funding rules in Australia do not allow companies to deliver equity for investment – so far it has been limited to products and services in exchange for small investment tranches.
Many Australian start-ups have been flummoxed by the existing rules and some have sought to register for funding through other jurisdictions. The delay has been explained as ‘protecting’ small investors.
“Today’s announcement is a key priority of the Turnbull Government’s National Innovation and Science Agenda,” Ms O’Dwyer said.
“CSEF or crowd funding is an emerging way for start-ups and early stage businesses to access the funding and investors they need, while maintaining adequate protections for retail investors who share in the risks and successes of these businesses.
“Following extensive consultation, the legislation will allow unlisted public companies with less than $5 million in assets and less than $5 million in annual turnover to raise up to $5 million in funds in any 12 month period,” the Minister said. 
“Companies that become an unlisted company in order to access crowd-sourced equity funding will receive a holiday of up to five years from some reporting and governance requirements.
“The Turnbull Government recognises the need to allow investors to make informed decisions and companies raising funds through crowd funding will be required to release an offer document.
“While investors will be able to invest an unlimited sum in crowdfunding, there will be a cap of $10,000 per issuer per 12-month period to ensure that mum and dad investors are not exposed to excessive risks.
“Australia’s CSEF model is competitive globally with the issuer cap of $5 million each year higher than the US and New Zealand cap, and the investor cap of $10,000 per issuance higher than the average in New Zealand and the UK.
“Intermediaries will play an important gatekeeper role and will need to conduct checks on companies before listing their offer. Intermediaries will be required to hold an Australian Financial Services Licence, providing issuers and investors with confidence in the integrity of the intermediary.
“Ongoing responsibility for issuing licenses for intermediaries and monitoring the operation of the crowd-sourced equity funding framework will sit with ASIC.
“Regulations to support the framework for crowd-sourced equity funding will be released for consultation shortly. The government will also consult on options to facilitate crowd-sourced debt funding in 2016,” Ms O’Dwyer said.
ends
