There are many types of 'crowd funding' floating around
on the internet. The most visible is project-based – think of
websites like Kickstarter or Pozible where you
'pledge' a certain amount of money and get a
'reward' (usually a physical product) in return. These
platforms are popular but 'pledgers' have almost no rights
to receive any sort of return or reward.
CAMAC has restricted its scope to look only at CSEF, which is a
form of corporate capital raising:
"Broadly, [CSEF] contemplates a company (the issuer)
seeking funds, particularly initial ('seed') or early stage
capital, by offering its equity to internet users (the crowd) in
return for cash. Issuers would publish their equity offers through
a website (sometimes referred to as an 'online portal' or a
'funding portal'), the operator of which would serve as an
intermediary between the crowd investors as the issuer, for the
purpose of the equity transactions."
CAMAC recognised that the current regulatory environment is
hostile to CSEF. If the issuer is structured as a proprietary
company, it is unable to have more than 50 non-employee
shareholders. If the issuer is a public company it must comply with
the Chapter 6D disclosure requirements for any public offering. It
was the predominant view that structuring CSEF as a managed
investment scheme would be too complex to be commercially
CAMAC has taken the significant step of proposing a new
regulatory regime specifically designed for CSEF offerings. The new
regime will comprise two main elements:
creating a new category of public company, known as an
'exempt public company'; and
tailored regulation specific to CSEF offerings.
Exempt public companies
Exempt public companies will be exempt from a range of
compliance obligations, including:
not being required to appoint an auditor until it has raised $1
million through CSEF and has expended $500,000;
not being considered a 'disclosing entity' within the
definition of s111AC;
not being required to hold an AGM or provide half-year
financial reports; and
not needing to comply with some requirements relating to
In recognition of the relaxed requirements applicable to exempt
public companies, CAMAC recommends that the status automatically
the company's capital exceeds $5 million for over 6
the turnover of the company exceeds $5 million per annum;
the company has been an exempt public company for more than
three years (with limited extensions available).
Some of the proposed regulations specific to CSEF offerings
limiting CSEF to Australian incorporated issuers who do not
have complex structures (such as investment or financial
institutions); are not listed companies; have not previously made
regulated public offers or already have substantial capital;
shares must be previously unissued, fully paid and limited to a
a cap of $2 million to be raised by CSEF by any one issuer in
any 12 month period;
certain disclosure requirements tailored to CSEF
The Government has not responded to CAMAC's report yet, so
it's uncertain to what extent the proposals will be
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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