David Tink and Dillon Fuzi examine the progress of the crowdsourced equity funding bill, currently before parliament.
On 24 November 2016, the Government introduced the Corporations Amendment (Crowd-sourced Funding) Bill 2016. The Bill aims to amend the Corporations Act 2001 to provide a framework for the regulation and implementation of crowdsourced equity funding (CSEF). CSEF is a method of capital raising that allows eligible companies (i.e. unlisted public companies limited by shares, with a principal place of business in Australia) to source small amounts of funds from a large number of different investors through intermediaries who operate a platform for the facilitation of CSEF offers to investors.
Although the implementation of a CSEF regime has been met with opposition since its inception, the Bill, which is an amended version of the 2015 bill of the same name, was referred to the Senate Economics Legislation Committee, who released a report recommending that the Bill be passed by the Senate.
The issue of regulating CSEF was initially referred to the Corporations and Market Advisory Committee in 2013, which, in May 2014, handed down its report and recommendations for implementation of a CSEF framework. Following receipt of the report the Government conducted a consultation process, which resulted in the release of the 2015 bill.
The 2015 bill was met with opposition in the House of Representatives, with amendments proposed prior to the bill’s introduction in the Senate aimed at striking an appropriate balance between protecting retail investors and providing additional investment and capital raising avenues for growing companies.
Under existing legislation eligible companies can already fundraise from sophisticated and professional investors and, in very limited circumstances, retail investors (limited to a maximum of 20 investors and a $2 million cap in a 12-month period). However to fuel the ‘ideas boom’ the government appears to be of the view that reform is required to provide early stage companies with greater access to retail investors in appropriate circumstances, with the Bill providing for eligible companies to be permitted to raise up to $5 million from numerous investors in a 12-month period.
After the positive news from the Senate Committee report last week, and with the Bill now before the Senate, we may be closer than ever to the introduction of much needed CSEF legislation.
We will keep our finger on the pulse for any updates on this important topic. For further information please contact a member of the KPMG Law team.