24 November 2016

Turnbull Government acting to open new capital markets

The Turnbull Government is acting to open up new and innovative sources of capital funding for Australian small businesses and start-ups, introducing legislation today to facilitate crowd-sourced equity funding in Australia.

The Corporations Amendment (Crowd-sourced Funding) Bill 2016 delivers on the Turnbull Government’s commitment to back small and start-up businesses help transition the Australian economy from the mining and investment boom to a more resilient and diversified economy that delivers jobs and growth to all Australians.

The Bill enables unlisted public companies with less than $25 million in assets and annual turnover to facilitate crowd sourced equity funding. These companies will be able to raise up to $5 million in any 12 month period through crowdfunding platforms.

Small companies that become public companies to use crowdfunding will be given a transition period of up to five years during which they will be eligible for exemptions from certain corporate governance and reporting requirements.

The Government is continuing to consult with a view to extend crowd-sourced equity funding in the new year to proprietary companies, which already have lower corporate governance and reporting requirements.

The Government has listened to stakeholders on how to best balance the fundraising needs of businesses and investor protection. Companies will need to meet minimum disclosure requirements. Retail investors will have an investment cap of $10,000 per company per 12 month period and a cooling off period - allowing withdrawal from their investment for up to 48 hours after making a commitment.

Licenced crowdfunding intermediaries will play a gatekeeping role by conducting checks on the companies they list on their platforms.

The Bill also increases flexibility to support development of new and specialised financial markets, including crowd-sourced equity funding platforms. In addition, the legislation extends the Treasurer’s powers to exempt specialised, and emerging financial market operators from clearing and settlement licensing regimes.

Further, it allows licensing requirements to be tailored to the needs of each market.

The legislation will complement the Turnbull Government’s existing financial sector and innovation policies including; the push for an internationally competitive FinTech industry, new tax incentives for angel investors and start-ups and changes to the tax treatment of crypto currencies.

These reforms, along with the Turnbull Government’s plan to give small and medium size businesses a tax cut, will play an important role in the transition underway in Australia’s economy.

The crowd-sourced equity funding framework will take effect six months from the date the Bill receives Royal Assent.