Senate Passes Crowd Funding Legislation – Finally

Well Federal Parliament has finally passed Australia’s first equity crowdfunding legislation.

According to Federal Treasurer, Scott Morrison in his Treasurer’s Second Reading Speech for theCorporations Amendment (Crowd-Sourced Funding) Bill 2016 “The Bill forms part of the government’s commitment to help transition the Australian economy from the mining investment boom to a more diversified economy, with broader based growth, and long-term strength and resilience.”

The new legislation enables unlisted public companies with up to $25 million in annual turnover and less than $25 million in gross assets to raise up to $5 million via equity crowdfunding platforms over a 12 month period.  Retail investors will be able to invest up to $10,000 per company in a 12-month period.

The Treasurer claims “The crowd-sourced equity funding bill .. achieves this goal by opening up new and innovative sources of capital funding for Australian small businesses and start-ups—a key driver of growth and jobs.”

The idea behind equity crowdfunding is that it should open up new avenues of capital raising, enabling younger companies to more easily get larger investments from a larger number of investors… and from smaller or “retail” investors, without the expense of preparing a full prospectus.

The Bill as passed is the result of a long series of consultations dating back to the Corporations and Markets Advisory Committee (CAMAC) review which commence in 2013.

The legislation is not without its critics with many of the companies that were expected to be amongst the first platform operators in Australia being less than complementary of it. Most of the criticisms are around the legislation keeping equity crowd funding out of the reach of many companies with only Public Companies being eligible to benefit from the legislation. In order for a private (or Pty Ltd) company to access equity crowd funding under the new legislation it must first convert into a public company… something many companies would only do for the purpose of becoming eligible to use equity crowd funding. Now if the company has a success crowd raise, it becomes exempt from many of the more expensive aspects of being a public company… but if it’s raise is unsuccessful the company will be burdened with extra governance and compliance costs OR the expense of converting back to a Pty Ltd.

Now apparently work is already underway to enable Pty Ltd companies to equity crowdfund but the Government has yet to release or openly consult on this issue.

The Bill is expected to become law in around six months time.  For full details of the legislation refer to Parliament’s Website.

We will bring you news on any major developments as they happen


The Techboard Team



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