More companies could now be eligible for crowd-sourced
funding - or could they?
The Government has for the second time, introduced legislation
to regulate crowd-sourced funding (CSF) in
Australia after the 2015 Bill was blocked by the Senate earlier
this year - but little appears to have changed.
Under the new Bill, unlisted public companies with less than $25
million of gross assets or $25 million annual turnover will be able
access the scheme - a significant increase from the $5 million cap
previously proposed. A larger pool of small and early-stage
companies could therefore be eligible for CSF.
48 hour cooling-off period
The cooling-off period for CSF investments has also been reduced
from 5 business days to 48 hours. This strikes a new balance
between certainty for companies and CSF intermediaries and the need
to protect investors.
Much of the same...
While more, larger, companies may now be able to participate in
the regime, those intending to do so should remember the
restrictions that would still apply. In particular:
The CSF available will remain capped at $5 million in any
12-month period (inclusive of any raisings under the small scale
Investment will also remain capped at $10,000 per company per
12-month period. There is no cap on investment across different
As to the other parts of the regime, remember:
Key points for eligible companies
Companies will have to use a specific CSF offer document for
Companies can only have one CSF offer open at any one
CFS offers will remain open for a maximum of three months.
A CSF offer can only be published on a single platform.
Making a CFS offer does not prevent the company from also
offering securities of the same class in the normal way.
Key points for CFS Intermediary Platforms
CFS intermediaries will need to hold specific financial
The CFS intermediary must display prominently on the platform
at all times a general risk warning, a cooling-off period notice,
and information on the fees charged to and interests taken in the
CFS intermediaries act as gatekeepers. Any published CFS offer
must meet requirements relating to the identity, good fame,
character and conduct of the company's directors which must not
be misleading or deceptive.
Where to from here? Investors and companies still face lengthy
Whatever happens, CFS legislation is still a long way off.
Whether or not the Bill passes the Senate this time round remains
unclear. If the Bill is passed it will still take at least six
months to come into force.
Further still, small businesses will still need to become public
companies to take advantage of the new laws and proprietary
companies are still completely excluded from the regime.
The bottom line? Investors and companies face lengthy delays in
accessing any CSF regime, and even then many restrictions will
remain on those who can access it.
Clayton Utz communications are intended to provide
commentary and general information. They should not be relied upon
as legal advice. Formal legal advice should be sought in particular
transactions or on matters of interest arising from this bulletin.
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