The Crowdfunding Bill: changing equity financing for start-ups,澳大利亚豪力法律服务微信公众号文章

On 3 December 2015, the Corporations Amendment (Crowd-sourced Funding) Bill 2015 was introduced into Parliament. The Bill aims to promote crowd-sourced funding or CSF for emerging small, unlisted public companies and provide increased investment opportunities for small-scale retail investors.

The Bill attempts to achieve this by implementing a two-pronged approach – removing existing barriers to CSF under the Corporations Act and promoting investment by increasing investor protections.

Removing existing barriers to CSF

Currently, the Corporations Act restricts the ability of small businesses and start-ups to raise equity via CSF as section 45A prohibits proprietary companies from exceeding 50 non-employee shareholders. Whilst such prescriptive limits are not imposed on public companies, they are also limited due to strict corporate governance and reporting requirements. This means that small emerging businesses often choose to remain proprietary despite the shareholder limitations.

However, the Bill attempts to remedy this and encourage businesses to become public by restricting the regulatory burden. By inserting the new Part 6D.3A—Crowd-sourced Funding into the existing Chapter 6D, the Bill makes eligible businesses largely exempt from the disclosure document requirements under Part 6D.2 and the prohibitions, liabilities and remedies relating to offers of security as set out in Part 6D.3.

Furthermore, eligible companies will also be exempt from obligations to hold an Annual General Meeting, may exercise an option to only provide financial reports to shareholders online and will not be required to appoint an auditor until more than $1 million has been raised from CSF offers.

Criteria for “eligible CSF companies”

In order to qualify for the exemptions granted under the Bill, the company must meet all of the following criteria:

the principal place of business must be in Australia;

the majority of the company’s directors must originally reside in Australia;

the consolidated gross assets must not exceed $5 million;

the annual revenue must not exceed $5 million;

it must not be listed; and

it must not be an investment company.

Increasing investor protections

While there are general protections that apply to all investors which aim to prevent excessive risk and promote informed decision making, the Bill also introduces additional protection mechanisms for retail investors. These protections include requirements such as:

all retail investors are limited to investing $10,000 per issuer per year;

there is a compulsory and unconditional five day cooling-off period in which an individual may withdraw their offer;

the issuer company and any related intermediaries are prohibited from offering financial assistance to an investor; and

a CSF application can only be accepted if it is accompanied by a signed risk acknowledgement statement.

By implementing these protections, the Bill aims to shelter small retail-investors from the high risks associated with investing in start-ups whilst also providing businesses with an alternative means of obtaining affordable finance.

Bill status

On 3 December 2015, the Bill was referred to the Senate Economics Legislation Committee for inquiry and review. The Committee is due to release a report by 22 February 2016.

Authors: Darren Pereira & Georgia Appleby

Contacts

Melbourne

Dan Pearce, Partner
T: +61 3 9321 9841
E: dan.pearce@holdingredlich.com

Sydney

Darren Pereira, Partner
T: +61 2 8083 0487
E: darren.pereira@holdingredlich.com

Brisbane

Trent Taylor, Partner
T: +61 7 3135 0668
E: trent.taylor@holdingredlich.com

Disclaimer

The information in this Article is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, we do not guarantee that the information in this article is accurate at the date it is received or that it will continue to be accurate in the future. We are not responsible for the information of any source to which a link is provided or reference is made and exclude all liability in connection with use of these sources.

【We provide excellent expert advice to businesses wishing to invest in Australia.】

Our previous news releases for Chinese investors include the following topics:
- Business set up in Australia, business structures, company administration, etc.
- Background information of Australia, including Australian government, legal system, and business structures, etc.
- Laws and regulations in various common areas, including protection of technology and intellectual property, anti-trust and consumer law, contract law, business migration, real property, public takeovers, and electronic commerce etc.
- Professional industrial updates and insights, such as regulation on foreign investment.

（原创文章，欢迎转发，谢谢关注！未经授权，严禁转载！）

豪力

律师事务所

Holding Redlich

Holding Redlich is a leading national Australian commercial law firm. We are member of LawExchange International. We have strong links to a number of businesses and law firms in China. We have lawyers that specialise in agribusiness, property, financial services, migration and M&A, being the areas of most interest to Chinese investors. We have also assisted many Chinese companies and nationals to find investment opportunities and to establish businesses in Australia.

联系电话 Telephone：

墨尔本 Melbourne：+61 3 9321 9999

悉尼 Sydney：+612 8083 0388

布里斯班 Brisbane： +61 7 3135 0500

For more information please see our website www.holdingredlich.com

WeChat：HoldingRedlich