Crowd-sourced funding ('CSF') is an emerging method of
funding, allowing businesses to obtain funding from a large number
of individual investors through an online platform.
This Bill establishes a new legislative framework for
crowd-sourced funding with reduced disclosure, governance and
reporting obligations to reduce costs. It is intended to make it
easier for small businesses to obtain funding from the public while
also ensuring that investors are protected.
The CSF framework will allow small, public, unlisted companies
to fundraise up to $5 million per year. It outlines the eligibility
requirements of a company seeking to make a CSF offer, the process
of making a CSF offer, the obligations of CSF intermediaries and
the prohibitions, liabilities and investor protections applying to
CSF offers, which include rules regarding defective disclosure
documents and advertising restrictions.
Eligibility of CSF Companies
Companies will be eligible for crowd-sourced equity funding if
have less than $5 million in assets and annual turnover;
are a public company limited by shares;
have their principle place of business and majority of
directors in Australia;
are not a listed corporation; and
do not have a substantial purpose of investing in securities or
interests in other entities or managed investment schemes.
Requirements for making a CSF offer
For a CSF offer to be eligible the:
offer must be for the issue of securities in the company making
company making the offer must be an 'eligible CSF
securities must satisfy the eligibility conditions;
offer must comply with the 'issuer cap'; and
company must not intend to use the funds to invest in
securities or interests in other entities or managed investment
Role of Intermediaries
CSF intermediaries must hold an Australian Financial Services
Licence (AFSL) and will have many new obligations under this new
'gatekeeper' obligations such as conducting checks on
offer documents on their platforms;
providing a communication facility for CSF offers;
displaying a risk warning, information regarding cooling-off
rights, fees charged to and interests in the issuer company on
their platform; and
closing and suspending offers and dealing with application
Retail investors will be limited to investing no more than
$10,000 per company each year.
There will also be:
an unconditional right to withdraw an application in relation
to a CSF offer within 5 business days;
a prohibition on providing financial assistance to enable
investments in CSF offers; and
a requirement to obtain and complete a risk acknowledgement
before their CSF application can be accepted.
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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