The return of equity crowdfunding: A small step in the right direction
On 24 November 2016, the Corporations Amendment (Crowd-sourced Funding) Bill 2016 (CSF Bill) was introduced into Parliament. The CSF Bill seeks to establish a regulatory framework to facilitate crowd-sourced equity funding by small, unlisted public companies. This alert outlines the features of the CSF Bill.
Crowd-sourced equity funding (CSF) is a type of fundraising, typically online, that allows a large number of investors to make a small financial contribution towards a company in exchange for equity in the company. CSF is becoming increasingly popular worldwide as a means to allow entrepreneurs and small businesses to fund their ventures.
However, there are currently a number of regulatory obstacles to raising funds through CSF in Australia, including:
The CSF Bill aims to remove the regulatory barriers to CSF by seeking to establish a framework to facilitate CSF in Australia. The main features of the CSF Bill are as follows:
The CSF Bill is the second attempt to remove the regulatory barriers to CSF in Australia. On 3 December 2015, the Corporations Amendment (Crowd-sourced Funding) Bill 2015 was introduced into Parliament. The bill faced heavy criticism from stakeholders for being overly restrictive, and in particular for limiting CSF to public companies and those entities with consolidated gross assets and consolidated annual revenue of less than $5 million each. The bill eventually lapsed on 9 May 2016.
The CSF Bill has addressed some of the concerns with the previous bill by allowing entities to have up to $25 million in consolidated gross assets and consolidated revenue, reducing the cooling-off period to 48 hours and extending the corporate governance and reporting concessions to converted public companies. Although these changes intend to make CSF more accessible for small businesses, the framework is still unavailable to private companies, a restriction that was a fundamental reason stakeholders opposed the previous bill. The Government has stated that it is continuing to consult with a view to extending this form of funding to private companies, however how this is proposed to be done remains to be seen.
It is not yet clear whether the revised CSF Bill will satisfy stakeholders and gain the support needed to pass through Parliament. However, we welcome the CSF Bill as the first step in the introduction of a regime which facilitates the growth of CSF in Australia.
For more information, please contact our Corporate Advisory and Governance team in Brisbane or Perth.