The Turnbull Government is delivering on its commitment to extend crowd-sourced equity funding to proprietary companies, introducing legislation to the Parliament today which will enact this important reform.
Extending the crowdfunding framework builds on the Turnbull Government’s support for the start-up and FinTech sector including the enhancements to the ASIC regulatory sandbox and tax incentives for investors in innovative start-ups.
The Government understands that different forms of finance are particularly important for innovative, early-stage businesses that may have difficulty accessing funding from traditional sources. As part of this Bill, proprietary companies wanting to access equity crowdfunding will no longer have to convert to a public company entity. Instead founders will be able to crowdfund while retaining the greater flexibility of the proprietary model.
The extension will also increase the ability of retail investors to access early-stage investment opportunities. However, these companies will be required to comply with additional obligations to protect investors, including:
- a minimum of two directors;
- financial reporting in accordance with accounting standards;
- audited financial statements once the company raises more than $3 million from crowdfunding offers; and
- restrictions on related party transactions.
This extension to proprietary companies builds on the framework for public companies which will commence 29 September 2017. Many features of the public company framework, such as the obligations of intermediaries, investor and company caps and the process for making crowdfunding offers, will be the same for proprietary companies.
Earlier this week the Australian Securities and Investments Commission released information on licensing arrangements for prospective platforms which can be found here.