After a few months on the shelf, the Government has returned to the issue of equity crowdfunding, yesterday introducing a bill into Parliament that aims to fix the problems that saw its previous attempt to pass legislation earlier this year fail.
The road to changing Australia’s regulations around equity crowdfunding has been a long one: former Small Business Minister, Kelly O’Dwyer first proposed changes last November.
With current Australian regulations limiting the scope of equity crowdfunding to wholesale or sophisticated investors who earn at least $250,000 a year or have $2.5 million in assets, O’Dwyer had announced that the new regulations would allow public companies with $5 million or less in annual turnover, or up to $5 million in assets, to raise $5 million a year from retail, or ‘mum and dad’ investors.
With the new bill, an amendment to the Corporations Act, unlisted public companies with less than $25 million in annual turnover and less than $25 million in gross assets to raise via equity crowdfunding platforms. Companies will be able to raise up to $5 million in a 12 month period.
As proposed in the previous bill, retail investors will be able to invest up to $10,000 per company in a 12-month period, with the cooling off period during which they can change their mind now down to 48 hours.
Treasurer Scott Morrison said the bill is a “commitment to back small and startup 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”.
As in the previous bill, Morrison said small companies that become unlisted public companies in order to raise through equity 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.
He added that the government has worked with stakeholders to balance the fundraising needs of companies with investor protection. As such, companies will need to meet minimum disclosure requirements while licenced crowdfunding platforms will play a gatekeeping role by conducting checks on the companies they list.
The government will continue to consult with stakeholders with a view to extend the legislation to private companies, those incorporated as proprietary limited, which already have lower corporate governance and reporting requirements, in 2017.
The new bill has been met with mixed reviews, with Fintech Australia president Simon Cant saying both Morrison and Labor’s Ed Husic have worked hard to implement something “within the difficult framework of the Corporations Act” and arrive at a balanced policy.
“We recognise there’s a lot more work to be done to expand the framework for private companies, but we’re pleased both sides of government have indicated their willingness to adopt this legislation quickly to kick-start funding opportunities for innovative public companies across Australia,” Cant said.
Jonny Wilkinson, cofounder of equity crowdfunding platform Equitise, acknowledged that more must be done but said that the proposed legislation is an important start to get something out into the market.
Despite his work on the regulations, Husic told The Australian he still has significant concerns, particularly around the reduction of the cooling off period for retail investors to two days. Husic said Labor also believes that the proposed regulations still lock out too many startups and small businesses.
A dissenting report from Labor senators saw the Government’s previous crowdfunding bill shelved earlier this year.
Image: Scott Morrison. Source: abc.net.au