The Government confirmed its commitment to introducing a legislative framework to facilitate crowd-sourced equity funding (CSEF). The consultation paper which the Government has released outlines key elements of the Government's CSEF framework for public companies and seeks feedback on whether the CSEF framework should be extended to proprietary companies.
CrowdReady will be making a submission before the deadline on 31 August 2015. Please contact us for your views.
Key Features of the proposed Australian Equity Crowdfunding Framework:
Issuers must be incorporated as a public company in Australia.
Limited to certain small enterprises that have not raised funds under existing public offer arrangements.
Relief from certain public company compliance costs would be available to newly registered or converted public companies. Reliefs include:
• exemptions from disclosing entity rules;
• allowing annual reports to be only provided online;
• exemption from holding an annual general meeting (AGM); and
• exemptions from the need to appoint an auditor and have financial accounts audited, subject to a cap of $1 million raised from CSEF or under a disclosure exemption.
Exemptions will be available for a period of up to five years, subject to annual turnover and gross assets thresholds of $5 million (excepting the audit exemption).
Issuer may raise up to $5 million in any 12‑month period, inclusive of any raisings under the small scale offerings exception but excluding funds raised under existing prospectus exemptions for wholesale investors.
Permitted securities are one class of fully paid ordinary shares per CSEF offer. All shares in a particular CSEF offer must have the same price, terms and conditions.
Reduced disclosure requirements, including a tailored CSEF disclosure document. Required disclosures will relate to:
• facts about the company and its structure, including financial statements;
• facts about the CSEF raising; and
• mandatory risk warnings.
Must hold an Australian Financial Services Licence.
Intermediaries would be responsible for monitoring compliance for investments made via their platform.
Must undertake prescribed checks on the issuer.
Must provide generic risk warnings to investors.
No restrictions on fee structures; however, fees paid by an issuer must be disclosed.
Permitted to invest in issuers using their platform; however, details of any investments must be disclosed.
Prohibition on the provision of investment advice and lending to CSEF investors.
Investment caps for retail investors of:
• $10,000 per offer per 12‑month period; and
• $25,000 in aggregate CSEF investment per 12‑month period, self‑certified by investors.
Signature of risk acknowledgement statements prior to investment, including that:
• investing in early stage companies is risky and the investor may lose the entirety of their investment;
• investors may not be able to sell their shares;
• the value of the investment may be diluted over time; and
• investors have complied with the investor caps.
Unconditional right to withdraw for 5 days after accepting offer.
Additional rights in relation to material adverse changes during the offer period.