A $5m Cap Proposed for Australian Equity Crowdfunding Framework

Yesterday the Australian Government released a consultation paper outlining the key elements of the Government’s proposed crowd-sourced equity funding (CSEF) framework for public and proprietary companies. Equitise has been collaborating with the Australian government to bring about measures removing the obstacles to CSEF, ensuring small businesses can access the capital they need to grow and improve.

Key Details

The consultation paper sets out the Government’s intended approach to a CSEF framework for public companies and a proposal to extend CSEF to proprietary companies. The paper also asks if there are unnecessary compliance costs and fundraising constraints under the Corporations Act for proprietary companies.

For proprietary companies, the key restrictive aspects of the Corporation Act are its constraints on public share issuances and the 50 shareholder cap. These limitations would make it difficult for proprietary companies to effectively use CSEF to raise funds from a large number of small shareholders. Without change to those key aspects, the need to convert from a proprietary to public company structure would be likely to continue to pose a barrier for startups and small businesses.

The paper suggests a A$5 million limit on capital raised in 12 month period for a company, compared to the NZ$2 million cap currently in place in New Zealand. Furthermore, investment caps for retail investors of A$10,000 per offer per 12-month period; and A$25,000 in aggregate CSEF investment per 12-month period are proposed.

Going Forward

Further details in the CSEF framework will be available in draft legislation due to be released for public comment later in the year. Equitise will continue to be heavily involved with the consultation phase for these exciting legislative changes with the expectation they will be introduced to Parliament in the Spring sittings.

"We've relished the opportunity to work with Minister Billson and his office in putting together such an important policy for businesses to access the capital they need to grow. Having launched in New Zealand earlier this year, we are excited about launching retail equity crowdfunding offers in the Australian market later this year." - Jonny Wilkinson, Co-Founder, Equitise.

Key Elements of the CSEF Framework

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