Crowd-sourced equity funding for proprietary companies Bill introduced
Crowd-sourced equity funding is an innovative type of fundraising that allows a large number of individuals to make small financial investments in exchange for an equity stake in the company.
Legislation to create a crowd-sourced equity funding regime for public companies will commence on 29 September 2017. Extending the crowd-sourced equity funding framework to proprietary companies will allow these companies to access an alternative form of finance with additional obligations that will protect investors.
The amendments extend the crowd-sourced equity funding regime to proprietary companies by:
- expanding the eligibility for the crowd-sourced equity funding regime to proprietary companies that meet eligibility requirements
- providing that proprietary companies with shareholders who acquire shares through a crowd-sourced equity funding offer are not subject to the takeovers rules
- adding special investor protection provisions for proprietary companies accessing the crowd-sourced equity funding regime, and
- removing the temporary corporate governance concessions in the Corporations Amendment (Crowd-sourced Funding) Act 2017 for proprietary companies that convert to or register as public companies to access the crowd-sourced equity funding regime.
The special investor protection provisions that will apply to proprietary companies accessing the crowd-sourced equity funding regime include requirements to:
- maintain a minimum of two directors
- prepare annual financial and directors’ reports in accordance with accounting standards
- have their financial reports audited once they raise $3m or more from crowd-sourced equity funding offers, and
- comply with the existing related party transaction rules that apply to public companies.
Eligible companies are able to raise A$5 million through CSF.