3 December 2015

Enabling crowd-sourced funding for small business

Legislation has been introduced into Parliament today to provide a framework for crowd-sourced equity funding (CSEF), encouraging Australians to innovate and invest, Minister for Small Business and Assistant Treasurer the Hon Kelly O’Dwyer said.

“Today’s announcement is a key priority of the Turnbull Government’s National Innovation and Science Agenda,” Minister O’Dwyer said.

“CSEF or crowd funding is an emerging way for start-ups and early stage businesses to access the funding and investors they need, while maintaining adequate protections for retail investors who share in the risks and successes of these businesses.

“Following extensive consultation, the legislation will allow unlisted public companies with less than $5 million in assets and less than $5 million in annual turnover to raise up to $5 million in funds in any 12 month period.

“Companies that become an unlisted company in order to access crowd-sourced equity funding will receive a holiday of up to five years from some reporting and governance requirements.

“The Turnbull Government recognises the need to allow investors to make informed decisions and companies raising funds through crowd funding will be required to release an offer document.

“While investors will be able to invest an unlimited sum in crowdfunding, there will be a cap of $10,000 per issuer per 12-month period to ensure that mum and dad investors are not exposed to excessive risks.

“Australia’s CSEF model is competitive globally with the issuer cap of $5 million each year higher than the US and New Zealand cap, and the investor cap of $10,000 per issuance higher than the average in New Zealand and the UK.

“Intermediaries will play an important gatekeeper role and will need to conduct checks on companies before listing their offer. Intermediaries will be required to hold an Australian Financial Services Licence, providing issuers and investors with confidence in the integrity of the intermediary.

“Ongoing responsibility for issuing licenses for intermediaries and monitoring the operation of the crowd-sourced equity funding framework will sit with ASIC.

“Regulations to support the framework for crowd-sourced equity funding will be released for consultation shortly. The Government will also consult on options to facilitate crowd-sourced debt funding in 2016,” Minister O’Dwyer said.