The introduction of the Corporations Amendment (Crowd-sourced Funding) Bill 2016 (Bill) on 24 November 2016 will hopefully provide startups and small businesses with a unique opportunity to raise capital through crowd-sourced funding (CSF). The Bill's introduction comes almost 12 months after the original CSF legislation was revealed, which subsequently lapsed in the Senate earlier this year.
The Bill is designed to promote innovation in the retail and fintech sectors by removing regulatory barriers preventing smaller investors from investing.
The Bill will allow unlisted public companies with less than $25 million in gross assets and consolidated annual revenue to raise up to $5 million per year from retail investors through CSF platforms. These companies will be granted temporary relief from some corporate governance and reporting requirements, for a transition period of up to five years.
Although companies are granted temporary exemptions, investors have some protection afforded by the minimum disclosure requirements outlined in the Bill, and the compliance checks that are conducted by CSF platforms. In addition, investors will be subjected to a cap of $10,000 per issue per year and, should they wish to back out of an investment, the Bill provides a 48-hour cooling off period.
During the introduction of the Bill, the Government expressed a desire to offer similar opportunities to private companies in the future, through the introduction of additional legislation. As for now, the Bill is yet to be passed by both the House of Representative and the Senate. However, there is potential for the law to come into effect by July 2017 if passed by the Senate early next year.
Startup businesses which are considering seeking funding in the coming year should consider if they may be able to use the option proposed by the Bill, and investigate which of the CSF platforms is most likely to suit their needs.
This publication does not deal with every important topic or change in law and is not intended to be relied upon as a substitute for legal or other advice that may be relevant to the reader's specific circumstances. If you have found this publication of interest and would like to know more or wish to obtain legal advice relevant to your circumstances please contact one of the named individuals listed.
