After much consternation, proprietary companies will now be able to bring on investment via equity crowdfunding, with Parliament this week passing the long-awaited amendments to its crowdfunding legislation.
Passed yesterday via the Corporations Amendment (Crowd-sourced Funding for Proprietary Companies) Bill, the changes had first been introduced to Parliament last September.
The new legislation will allow proprietary companies or unlisted public companies with annual turnover or gross assets of up to $25 million to raise up to $5 million a year through an equity crowdfunding platform.
In exchange, proprietary companies that raise through equity crowdfunding will need to prepare annual financial and directors’ reports. In addition, all companies that raise $3 million or more via equity crowdfunding will have to have their financial statements audited, up from $1 million.
The changes will take effect in 28 days from the passing of the legislation.
Zed Seselja, assistant minister for treasury and finance, told Parliament on Wednesday, “This bill’s introduction will enable proprietary companies to obtain the capital they need to turn good ideas into commercial successes, while providing Australian investors with a larger pool of choice.”
It has been a long road to this point, with the fintech community picking up this battle after winning the fight to open equity crowdfunding up to retail, or mum and dad, investors in January.
Retail investors are able to invest up to $10,000 per company in a 12 month period, with a cooling off period of five days.
Jonny Wilkinson, cofounder of equity crowdfunding platform Equitise, said the new legislation concerning proprietary companies would provide a significant boost to businesses.
According to Wilkinson, Equitise has received 570 formal applications from businesses looking to raise through its platform since January, however less than five percent completed the process to “be in a position to raise funds”.
“Whilst some of these companies were not suitable for equity crowdfunding, a large proportion thought the time, cost and compliance for converting and managing a public company to be too onerous at a point where they needed to focus their energies on growing their business,” he said.
“Having a formalised structure and process for smaller proprietary companies to raise funds from the crowd – their customers, friends and family – will be a huge boost to small businesses and the economy, driving both growth and employment. In turn, it also gives everyday investors the opportunity to invest in these companies and potentially make a return.”
Ed Husic, Shadow Minister for the Digital Economy, welcomed the bipartisan approach that was taken to the passing of the bill.
“After stalling for a year, we’re pleased a new Treasurer took a constructive approach to the bill, agreeing with an Opposition amendment to help ensure the new laws take effect sooner than initially proposed,” he said.
“This is the way the Parliament should work – especially when it comes to supporting laws to help smaller firms find new ways to finance future growth.”
Image: Equitise cofounders Jonny Wilkinson and Chris Gilbert. Source: Supplied.