The Corporations Amendment (Crowd-sourced Funding) Bill 2016 was introduced on 24 November 2016 after a similar bill in 2015 lapsed at Parliament. The bill amends the Corporations Act 2001 (Cth) and creates a framework for facilitating crowd-sourced equity funding (“CSF”).
CSF is an evolving form of funding allowing entrepreneurs to raise funds from a large pool of investors. It follows from the recent emergence of online crowd funding models providing investors with rewards and physical goods like Indiegogo and Kickstarter and in turn facilitates the issue of equity in the funded company.
The Bill provides interesting regulatory and disclosure issues for CSF offers made and highlights the need for a balance to be struck between protecting retail investors and promoting growth in start-ups.
Key Features
- Eligibility for CSF is limited to unlisted public companies with:
- AU$25 million in consolidated gross assets; and
- AU$25 million in annual revenue;
- Fundraising cap of AU$5 million in any 12 month period;
- Limited disclosure requirements made under a “CSF offer document”;
- Regulations and obligations of CSF intermediaries – the platform operators;
- Investment caps for retail investors of AU$10,000 per issuer per one year period; and
- Restrictions on advertising CSF offers.
Commencement
Schedule 1 of the CSF Bill, which relates to the establishment of the framework for CSF, and Schedule 2, relating to amendments of the corporate governance requirements, are both to commence within 6 months of the day the Act receives Royal Asset or by Proclamation. Schedule 3, relating to exemption powers for ASIC, will commence on the day after assent is received.
Author
Joshua Leslie